The executive body of the European Union (EU) wants to integrate banking regulations to ensure that should another financial crisis arise, the burden on the taxpayer will be limited.
Deeper economic integration will be achieved through a banking union, which the European Commission considers one of the “building blocks” of recovery and sustainability within the eurozone.
Although the major bailouts that occurred post-2008 prevented the major and near-universal collapse of western banking and what would have been severe “economic disruption” immediately following, it has nevertheless led to a severe age of austerity and a massive reduction in the amount that is invested in public services.
The extensive proposals would prevent this from happening again, to such a degree that where the financial situation of a bank deteriorates so rapidly and significantly, its key functions will be rescued, while responsibility for restructuring and rescuing it would be left to the owners and creditors.
“Today’s (June 6th) proposal is an essential step towards banking union in the EU and will make the banking sector more responsible,” said Jose Manuel Barroso, president of the European Commission. “This will contribute to stability and confidence in the EU in the future, as we work to strengthen and further integrate our interdependent economy.”
The framework of the banking union will be based on tools that will provide member states with the power of prevention, early intervention and resolution when a financial situation enters a critical stage.