The banking union
is a key component of the economic and monetary union. It aims to ensure that:
- banks are robust and able to withstand any future financial crises;
- market fragmentation is reduced by harmonised financial sector rules;
- non-viable banks are resolved without recourse to taxpayers' money and with minimal impact on the real economy.
The banking union is currently based on two fully operational pillars: the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). Looking into the future, it is desirable to complete it with the creation of a common deposit insurance scheme.
The SSM dates back to June 2012, when the Heads of State and Government of the European Union decided to create a single banking supervisor, with the aim of improving the quality of supervision in the euro area, promoting market integration and severing the negative link between confidence in banks and doubts about public debt sustainability.
The SSM was created with the approval of 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, and came fully into operation on 4 November 2014.
The SSM is a system comprising the European Central Bank (ECB) and the national competent authorities (NCAs), and the ECB is responsible for its effective and consistent functioning. Its scope encompasses the countries whose currency is the euro and those other EU Member States that wish to join by establishing close cooperation. Bulgaria currently participates in the SSM through close cooperation.
The banking system is supervised in line with the legal framework set out in European legislation and in the national implementing regulations. The existence of a single supervisor and a set of common legislative texts (the single rulebook) helps ensure a level playing field for banks in all participating countries.