engleski

THE BANKING UNION AS AN INSTRUMENT FOR PREVENTING CRONY CAPITALISM IN THE BANKING SECTOR

The Banking Union is viewed as one of the final chapters in total harmonization of the European Single Market along with the tax harmonization incentives. The Financial Crisis of 2007 showed that a single supervisory mechanism was needed in order to keep an eye on the banks in Euro area and thus the Banking Union was born. While states jealously guard their tax sovereignty they are more than willing to give up their monetary sovereignty when they join the Euro area. The Banking Union today is made of the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). The third pillar in the full Banking Union is going to be the European deposit insurance scheme (EDIS). The aim of this paper is to show that the Banking Union rules for managing failing banks will significantly prevent a possibility of crony capitalism in banking sectors in CEE EU member states. CEE countries have some historical experience with bank failures which can be dated to the period of transition during the 1990s. Some of them also have experience with crony capitalism. Many of them had combined experience of crony capitalism and bank failures. This was possible because of two reasons: in the 1990s they were not members of the EU and later there were no rules that dealt with bank failures at a European level and each state could intervene as it wanted. Today these states can intervene only according to the Banking Union rules which will hopefully reduce crony capitalism in their banking sectors.

Banking Union, bank failures, rules for managing bank failures, crony capitalism

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