European Banking Alliance Research

As a regional political and economic group, the European Union (EU) has achievedthe highest level of integration in the world, so the development of EU has receivedextensive attention from the world. Affected by the global financial crisis andEuropean sovereign debt crisis, European banks were in trouble. To rescue thesebanks, local governments, the European Central Bank and other related institutionstook some measures, such as capital injection, expanding the range of eligiblecollateral. But these measures were only a temporary solution. In order to solve thecrisis from the root, and to maintain the stability of the financial system, the EUproposed to set up European Banking Union. European Banking Union consists ofthree pillars, that is Single Supervisory Mechanism, Single Resolution Mechanismand Common Deposit Insurance Scheme. This paper will analyze the core content andthe latest progress of these three pillars, pointing out that the banking union will playa positive role in breaking the negative feedback loop between banks and theirsovereigns, preventing financial market differentiation and protecting the interests ofthe depositors and taxpayers. In addition, the paper will also discusses in detailseveral fundamental choices that decision makers will need to make in setting up thebanking union, such as the participant countries, the coverage of the banks, theEuropean Central Bank double identity problem, financial support and other details.In spite of many difficulties, with the joint effort of German, French and othercountries, the final establishment of European Banking Union is just around thecorner. European Banking Union have an important influence on promoting theintegration process of EU, maintaining the stability of European financial system andwill consolidate the European Monetary Union.