ABSTRACT
Establishment of the Banking Union (BU) is one of the European Union’s answers to the global financial crisis. Its main aim is to enhance Europe’s financial stability, primarily by breaking the vicious circle between the banks and their sovereigns. Participation is obligatory for members of the Economic Monetary Union (EMU) and optional for non-EMU member states. Accordingly, several Central and Eastern European (CEE) countries automatically became members of the BU while others can choose either to opt in or to opt out. Of the three pillars of the BU, the Single Supervisory Mechanism and the Single Resolution Mechanism are already in operation, while the European Deposit Insurance Scheme is under preparation. Whether or not to join the BU is a difficult and multidimensional question, and not only for CEE countries actually. In this chapter, from the viewpoint of CEE countries, we compare the legal framework and, where applicable, the concrete practices of bank supervision and resolution within and outside the BU, as well as the advantages and disadvantages of membership, with a special focus on banking and financial stability issues and governments’ room for manoeuvre in national banking policy. The aim of the chapter is to evaluate whether or not it is in the CEE countries’ interests to join the BU.
