Abstract
The EU’s banking union aims to break the “doom loop” that makes governments dependent on banks and banks dependent on governments. However, current arrangements address only the first objective: the single supervisory mechanism should make banks less likely to fail. The single resolution mechanism should make banks resolvable, or “safe to fail,” so that investors, not taxpayers bear the cost of bank failure and restructuring. To make banks less dependent on governments requires additional measures. Limiting the exposure of banks to individual governments is a start, but true insulation of banks from governments may require the introduction of a Euro charter for euro banks. That in turn could create the basis for a single deposit guarantee scheme, the third and to the man in the street arguably the most important aspect of banking union.
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