Banking Union
A banking union is an integrated regulatory and supervisory framework for banks across multiple countries.
Meaning in Practice
A banking union typically includes centralized supervision, a common resolution mechanism, and harmonized deposit insurance standards. It aims to ensure consistent oversight and crisis management. Such frameworks are common in monetary unions.
Why It Matters
Banking unions reduce fragmentation and strengthen financial integration. They enhance cross-border stability and limit sovereign-bank risk linkages. Coordinated supervision improves systemic resilience.
Market Impact
Integrated supervision can lower funding costs by increasing investor confidence. Harmonized rules reduce regulatory arbitrage and market fragmentation. Stability improvements support cross-border capital flows.
Example
In a monetary union, banks may be supervised by a central authority rather than national regulators to ensure uniform standards.