The future of the European banking union : risk-sharing and democratic legitimacy

Abstract

This chapter looks at the future of the Banking Union. It focuses on two factors for its sustainability over time. First, the extent to which the Banking Union can rely on the existing risk-sharing mechanisms at the European level to address financial instability and systemic shocks. Second, the extent to which the Banking Union will be considered to have democratic legitimacy. These two factors are intertwined. As the Banking Union leads to much deeper integration than ever before, there will be distributive implications in periods of both financial stability and instability. The future of the Banking Union will depend on the extent to which it will be resilient at all times, not only with risk-sharing, but also with a democratic system that ensures that its distributive effects are perceived as legitimate.