Abstract
Although financial integration and convergence of EMU member countries reached a high level, the financial crisis, that has developed into a banking and debt crisis, has caused an intense process of fragmentation of financial markets along national borders. This significantly complicated the implementation of the single monetary policy and disrupted the monetary transmission mechanism. Furthermore, in EMU, the crisis was much more intense than in other economies, and was rapidly transmitted among Member States. Besides, the contagion spread quickly from banks to sovereigns and vice versa, creating a “vicious loop” between banks and national finances.This paper attempts to show that adequate, strong and politically independent supranational bank regulation and resolution is necessary for the viability of banking sector, but also the economies in European monetary union. It should restore the market confidence and harmonize the rules of the game in the single financial market. Although the project is on its very beginning, there are some first encouraging results.
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