World Economy and Policy 2025, 2025(2):1

Development of the European Banking Union and Barriers to Its Completion: A Brief Review

Tomáš Kolář, Stanislav Šaroch

The European Banking Union aims to integrate and stabilize European banking systems, yet it remains incomplete nearly two decades after the 2008 crisis. This paper reviews key legislative milestones and synthesizes the academic literature on the development of the Banking Union. The literature identifies the absence of a European Deposit Insurance Scheme as the central missing pillar. The core obstacle is a distributive conflict over risk sharing: Germany and allied creditor states prioritize risk reduction, while several Southern member states favour risk sharing. EU-level negotiations, therefore, continue to centre on identifying politically feasible compromises between risk reduction and risk sharing. Recent progress is reflected in advancing talks on the Crisis Management and Deposit Insurance reform package. The article provides a political economy-informed synthesis of the dynamics that have delayed completion. It focuses on national preferences, institutional constraints, and recent policy sequencing.

Keywords: Banking Union, European Union, policy-making, regulatory framework, Banks, Legislation
JEL classification: E44, E58, G28, K2

Published: December 30, 2025  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Kolář, T., & Šaroch, S. (2025). Development of the European Banking Union and Barriers to Its Completion: A Brief Review. World Economy and Policy, 2025(2), 1
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Aguado, J., Day, P., 2019. Bank of Spain calls for EU banking union implementation, warns of economic risks. Reuters.
    2. Asimakopoulos, I., Howarth, D., 2022. Stillborn Banking Union: Explaining Ineffective European Union Bank Resolution Rules. JCMS J. Common Mark. Stud. 60, 264-282. https://doi.org/10.1111/jcms.13212 Go to original source...
    3. Barata, M.A., 2022. Completing a half full or a half empty Banking Union: the introduction of the common backstop [WWW Document]. Florence Sch. Bank. Finance. URL https://fbf.eui.eu/completing-a-half-full-or-a-half-empty-banking-union-the-introduction-of-the-common-backstop/ (accessed 4.30.25).
    4. Beck, T., Krahnen, J.-P., Martin, P., Mayer, F., Jean, P.-F., Tröger, T., Mauro die Weder, B., Verón, N., Zettelmeyer, J., 2022. Completing Europe's banking union: economic requirements and legal conditions [WWW Document]. Bruegel Bruss.-Based Econ. Think Tank. URL https://www.bruegel.org/policy-brief/completing-europes-banking-union-economic-requirements-and-legal-conditions-0 (accessed 1.16.26).
    5. Braun, B., Gabor, D., Hübner, M., 2018. Governing through financial markets: Towards a critical political economy of Capital Markets Union - Benjamin Braun, Daniela Gabor, Marina Hübner, 2018. Compet. Change 222 101-116. Go to original source...
    6. Carmassi, J., Dobkowitz, S., Evrard, J., Parisi, L., Silva, A.F., Wedow, M., 2018. Completing the Banking Union with a European Deposit Insurance Scheme: Who is Afraid of Cross-Subsidisation? SSRN Electron. J. https://doi.org/10.2139/ssrn.3161390 Go to original source...
    7. Centre for European Policy (CEP), 2016. EUROPEAN DEPOSIT INSURANCE SCHEME - Policy Brief.
    8. Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, 2013.
    9. Crimmins, C., 2010. Ireland faces "horrendous" bank bill, Spain downgraded. Reuters.
    10. de Larosière, J., 2009. Report of the High-Level Group on Financial Supervision in the EU.
    11. Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC Text with EEA relevance, 2013.
    12. Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council Text with EEA relevance, 2014.
    13. Dombret, A., 2015. European deposit insurance scheme: well-intentioned but altogether premature [WWW Document]. URL https://www.bundesbank.de/en/press/contributions/european-deposit-insurance-scheme-well-intentioned-but-altogether-premature-618570 (accessed 8.12.25).
    14. Donnelly, S., 2018. Advocacy coalitions and the lack of deposit insurance in Banking Union. J. Econ. Policy Reform 21, 210-223. https://doi.org/10.1080/17487870.2017.1400437 Go to original source...
    15. ECB, 2025. Bulgaria to join euro area on 1 January 2026.
    16. ECB, 2023. The CMDI package: a vital building block to improve our crisis management framework.
    17. Epstein, R.A., Rhodes, M., 2016. The political dynamics behind Europe's new banking union. West Eur. Polit. 39, 415-437. https://doi.org/10.1080/01402382.2016.1143238 Go to original source...
    18. ESM, 2026. Explainers [WWW Document]. Eur. Stab. Mech. URL https://www.esm.europa.eu/about-us/explainers (accessed 1.16.26).
    19. ESRB, 2024. Countercyclical capital buffer [WWW Document]. Eur. Syst. Risk Board. URL https://www.esrb.europa.eu/national_policy/ccb/html/index.en.html (accessed 3.10.25).
    20. Euroactiv, 2017. Merkel backs Macron's call for multi-speed EU, "small" eurozone budget. Euractiv. URL https://www.euractiv.com/section/future-eu/news/merkel-backs-macrons-call-for-multi-speed-eu-small-eurozone-budget/ (accessed 8.7.25).
    21. Eurogroup, 2022. Eurogroup statement on the future of the Banking Union of 16 June 2022 [WWW Document]. Consilium. URL https://www.consilium.europa.eu/en/press/press-releases/2022/06/16/eurogroup-statement-on-the-future-of-the-banking-union-of-16-june-2022/ (accessed 8.7.25).
    22. European Commission, 2023. Reform of bank crisis management and deposit insurance framework - European Commission [WWW Document]. URL https://finance.ec.europa.eu/publications/reform-bank-crisis-management-and-deposit-insurance-framework_en (accessed 8.7.25).
    23. European Commission, 2016. Effects analysis on the European deposit insurance scheme (EDIS) - Finance [WWW Document]. URL https://finance.ec.europa.eu/publications/effects-analysis-european-deposit-insurance-scheme-edis_en (accessed 1.16.26).
    24. European Parliament, 2025. LEGISLATIVE TRAIN 08.2025 - A NEW PLAN FOR EUROPE'S SUSTAINABLE PROSPERITY AND COMPETITIVENESS.
    25. European Parliament, 2024. European Deposit Insurance Scheme (EDIS) | Legislative Train Schedule [WWW Document]. Eur. Parliam. URL https://www.europarl.europa.eu/legislative-train/spotlight-JD21/file-jd-european-deposit-insurance-scheme-(edis) (accessed 1.24.25).
    26. Eurostat, 2025. Gross non-performing loans, domestic and foreign entities - % of gross loans [WWW Document]. Eurostat. URL https://ec.europa.eu/eurostat/databrowser/view/tipsbd10/default/table?lang=en (accessed 8.7.25).
    27. Fonte, G., Amante, A., 2023. Italy parliament rejects ESM reform, irking Brussels. Reuters.
    28. Gutiérrez-López, C., Abad-González, J., 2020. Sustainability in the Banking Sector: A Predictive Model for the European Banking Union in the Aftermath of the Financial Crisis. Sustainability 12, 2566. https://doi.org/10.3390/su12062566 Go to original source...
    29. Hallak, I., 2024. European Deposit Insurance Scheme (EDIS) - EU Legislation in Progress, PE 579.090. Eur. Parliam. Res. Serv. EPRS.
    30. Halpin, P., Humphries, C., 2025. Ireland cuts AIB stake and says it may exit bank this year. Reuters.
    31. Hartmann-Wendels, T., 2013. Basel III - Auswirkungen auf Banken und Finanzsystem. Schmalenbachs Z. Für Betriebswirtschaftliche Forsch. 65, 72-96. https://doi.org/10.1007/BF03373023 Go to original source...
    32. Högenauer, A.-L., 2023. The ECB as a banking supervisor: transparent compared to what? J. Eur. Integr. 45, 121-137. https://doi.org/10.1080/07036337.2022.2154764 Go to original source...
    33. Höpner, M., Schmidt, S.K., Seikel, D., 2025. Asymmetry resolved? Revisiting negative and positive European integration. J. Eur. Public Policy 32, 2595-2607. https://doi.org/10.1080/13501763.2025.2512897 Go to original source...
    34. Howarth, D., Quaglia, L., 2018. The difficult construction of a European Deposit Insurance Scheme: a step too far in Banking Union? J. Econ. Policy Reform 21, 190-209. Go to original source...
    35. Howarth, D., Quaglia, L., 2013. Banking on Stability: The Political Economy of New Capital Requirements in the European Union. J. Eur. Integr. 35, 333-346. https://doi.org/10.1080/07036337.2013.774780 Go to original source...
    36. Kudrna, Z., 2016. Financial market regulation: crisis-induced supranationalization. J. Eur. Integr. 38, 251-264. https://doi.org/10.1080/07036337.2016.1140153 Go to original source...
    37. Kudrna, Z., Gabor, D., 2013. The Return of Political Risk: Foreign-Owned Banks in Emerging Europe. Eur.-Asia Stud. 65, 548-566. https://doi.org/10.1080/09668136.2013.779458 Go to original source...
    38. Kuznichenko, P., Frolov, S., Orlov, V., Boiko, O., 2021. European Deposit Insurance Scheme implementation: pros and cons. Banks Bank Syst. 16, 116-126. https://doi.org/10.21511/bbs.16(1).2021.11 Go to original source...
    39. Mones, D., Hayes, D., 2024. Europe's 50 largest banks by assets, 2024 | S&P Global [WWW Document]. URL https://www.spglobal.com/market-intelligence/en/news-insights/research/europes-50-largest-banks-by-assets-2024 (accessed 8.7.25).
    40. Mones, D., Hayes, D., Lozano, C., 2025. Europe's 50 largest banks by assets, 2025 [WWW Document]. SP Glob. Mark. Intell. URL https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/4/europes-50-largest-banks-by-assets-2025-88404022 (accessed 1.15.26).
    41. Nielsen, B., Smeets, S., 2018. The role of the EU institutions in establishing the banking union. Collaborative leadership in the EMU reform process. J. Eur. Public Policy 25, 1233-1256. https://doi.org/10.1080/13501763.2017.1285342 Go to original source...
    42. Pánek, D., 2013. Single supervisory mechanism bank as a first step to the banking union. Presented at the 10th International Scientific Conference, Czech Republic, pp. 255-257.
    43. Pérez, S.A., 2019. A Europe of creditor and debtor states: explaining the north/south divide in the Eurozone. West Eur. Polit. 42, 989-1014. https://doi.org/10.1080/01402382.2019.1573403 Go to original source...
    44. Płóciennik, S., 2018. The Missing Pillar of the Banking Union: German Scepticism and the European Deposits Insurance Scheme [WWW Document]. Pol. Inst. Int. Aff. URL https://pism.pl/publications/The_Missing_Pillar_of_the_Banking_Union__German_Scepticism_and_the_European_Deposits_Insurance_Scheme (accessed 8.7.25).
    45. Posner, E., Véron, N., 2010. The EU and financial regulation: power without purpose? J. Eur. Public Policy 17, 400-415. https://doi.org/10.1080/13501761003661950 Go to original source...
    46. Quaglia, L., 2019. The politics of an 'incomplete' Banking Union and its 'asymmetric' effects. J. Eur. Integr. 41, 955-969. https://doi.org/10.1080/07036337.2019.1622541 Go to original source...
    47. Quaglia, L., Royo, S., 2015. Banks and the political economy of the sovereign debt crisis in Italy and Spain. Rev. Int. Polit. Econ. 22, 485-507. https://doi.org/10.1080/09692290.2013.877059 Go to original source...
    48. Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 Text with EEA relevance, 2013.
    49. Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010, 2014.
    50. Reuters, 2013. Euro zone must fulfil banking union agreements - Spain PM. Reuters.
    51. Schild, J., 2018. Germany and France at cross purposes: the case of Banking Union. J. Econ. Policy Reform 21, 102-117. https://doi.org/10.1080/17487870.2017.1396900 Go to original source...
    52. Skuodis, M., 2018. Playing the creation of the European banking union: what union for which Member States? J. Eur. Integr. 40, 99-114. https://doi.org/10.1080/07036337.2017.1404056 Go to original source...
    53. Spendzharova, A., 2014. Banking union under construction: The impact of foreign ownership and domestic bank internationalization on European Union member-states' regulatory preferences in banking supervision. Rev. Int. Polit. Econ. 21, 949-979. https://doi.org/10.1080/09692290.2013.828648 Go to original source...
    54. Tamma, P., Arnold, M., 2025. EU strikes deal to overhaul bank failure rules. Financ. Times.
    55. Tisera, F., 2011. Factbox: Chronology of Spain crisis and reforms. Reuters.
    56. Villeroy de Galhau, F., 2021. François Villeroy de Galhau: The Banking Union - time to move forward again. BIS.
    57. Wolff, G., 2016. European Parliament testimony on EDIS.
    58. Zeitlin, J., 2023. Hierarchy, polyarchy, and experimentalism in EU banking regulation: the Single Supervisory Mechanism in action. J. Eur. Integr. 45, 79-101. https://doi.org/10.1080/07036337.2022.2144279 Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content