The ‘Game Changer’ in the Euro Area: Banking Union and Commercial Banking

This paper examines the functioning of Banking Union from its inception to the covid-related economic crisis and explains how Banking Union has changed banking regulation and supervision in the euro area and what this entails for commercial banking. Banking Union, as originally conceived, was to be based on three main pillars. The first pillar is the Single Supervisory Mechanism (SSM), whereby the responsibility for banking supervision is shared between the European Central Bank (ECB) and the national competent authorities working collectively in one system. The second pillar is the Single Resolution Mechanism (SRM), which is responsible for the planning and resolution of cross-border banks directly supervised by the ECB. The third proposed pillar of Banking Union, a common deposit guarantee scheme, was never established.