The idea of banking union has important implications for the EU. It is a political project towards greater integration, which also increases the impact of the strongest and the most effective institution – the European Central Bank (ECB). The stable growth of the EU depends on financial sector stability.
The EU has suffered much in recent years due to light-touch financial supervision at a national level. In many cases there was interdependence between the weak condition of public financial management and the easy regulatory approach to the banking sector. The lack of fiscal discipline caused public debt to increase, financed by the banking sector with government approval. This shifted the balance of power in the relations between governments and banks.
