Abstract
Banking union is arguably the most important EU reform since the Maastricht Treaty, transferring substantial authority to European regulators and taking a significant step toward fiscal union. However, it remains incomplete, as Germany has repeatedly blocked progress on the European Deposit Insurance Scheme (EDIS). This opposition contrasts with German support for an expansive Single Supervisory Mechanism (SSM) and limited Single Resolution Mechanism (SRM). This paper explains the inconsistent German position on banking union’s components by examining the interests of the different elements of the German banking industry in a multi-level governance perspective. While the savings banks and cooperatives have staunchly opposed any form of banking union, preferring local regulation, the commercial banks’ position is more complex. They saw the SSM as a way to eliminate their competitors’ national or local regulatory advantages both within Germany and elsewhere in Europe. The SRM similarly offered benefits for large banks by ensuring that resolution was funded at the European level. However, EDIS threatened their private deposit insurance scheme, so they joined with the other German banks in opposing its development. In doing so, they blocked completion of banking union.
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