Eurozone as home country of banks

Karel Lannoo is Chief Executive Officer and Senior Research Fellow at CEPS. © CEPS 2012

Once again, the Eurozone Council has managed to surprise the markets. By moving banking supervision of the eurozone to the ECB in return for the direct recapitalisation of banks by the ESM, a huge step towards a more federal banking model has been taken. This move should allow a gradual denationalisation of banking and a more independent and streamlined supervision, which is what banking union is all about. But the decision will have to be taken to its full extent: it has far-reaching implications and raises many questions, essentially of an operational and legal nature and of scope. And it moves the EU-17 further ahead of the eurozone ‘outs’. These matters will have to be clarified in the coming weeks, implying an enormous workload for the European Commission, the Council and the ECB, and a roadmap to be adopted by the Ecofin Council on 9 July.