European Deposit Insurance and Resolution in the Banking Union

Since the E uropean Council of June 2012, ‘banking union’ is a key item for the EU 's policy agenda. This contribution outlines the state of the policy debate – identifying the elements that are missing but important from a theoretical viewpoint. Concrete proposals are made as to how the missing elements could be added in the form of a new E uropean Deposit Insurance and Resolution Authority, which would work alongside the ‘single supervisory mechanism’ under which the E uropean Central Bank assumes supervisory powers for the largest eurozone banks. The paper also illustrates how a gradual transition could align incentives and mitigate the political resistance to a full banking union. Finally, new estimates are provided for how much would be needed for a E uropean Deposit Insurance and Resolution Fund.