The main aim of the subject European Union Banking, Past, Present and Future is to show how the European Financial System works, especially the European Central Bank (ECB); the long way followed to its creation; its response to the Great Recession and the challenges it will have to overcome in order to consolidate a real and stable Baking Union for the 27 members of Eurozone.
There is not possible a developed economy without a highly qualified financial system. Based on this assumption the European Union (EU) have had the objective of an integrated financial system of all its members since its creation in the Treaty of Rome in 1957.
Many steps have been done since then. The most important one was the Treaty of Maastrich in 1992 with the creation of the Economic and Monetary Union and the introduction of a common monetary unit: euro (art. 4). The creation of the Euro area and a new supranational institution, the European Central Bank (ECB), was a milestone in the long and complex process of European integration.
Since 1 January 1999 the ECB has been responsible for conducting monetary policy for the euro area. The responsibility for monetary policy was transferred from the national central banks of 11 EU Member States to the ECB in January 1999, Greece joined in 2001, Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014 and Lithuania in 2015. The ECB employs the common monetary policy to create an efficient and safe financial sector for the single market.
The main economic challenge the UE had to cope with was to give a unified answer to the Great Recession that emerged in 2008. The ECB, together with the Commission and International Monetary Fund (IMF), have negotiated Memorandums of Understanding (MoU) with some European countries strongly hit by the crisis, to support their financial systems.
As the financial crisis evolved and turned into the Eurozone debt crisis, it became clear that, for those countries which shared the euro and were even more interdependent, a deeper integration of the banking system was needed. That’s why, on the basis of the European Commission roadmap for the creation of the Banking Union, the EU institutions agreed to establish a Single Supervisory Mechanism and a Single Resolution Mechanism for banks. Banking Union applies to countries in the euro-area. Non-euro-area countries can also join.
As a further step to a fully-fledged Banking Union, in November 2015, the Commission put forward a proposal for a European Deposit Insurance Scheme (EDIS)