The ECB’s Role in the European Banking Union

Abstract

Abstract This chapter analyses the institutional and legal framework governing the European Central Bank (ECB)’s responsibility in monetary policy, banking supervision, and resolution. It raises issues concerning the primacy of monetary policy and the price stability mandate and how this can be reconciled with the ECB’s support for the Union’s general economic policies (so-called secondary objectives) and for the discharge of its other responsibilities, including banking supervision, within the Banking Union. The chapter considers the institutional context of the ECB’s role in the Banking Union by analysing its price stability mandate and the importance of its secondary objectives in informing its role as a bank supervisor. It discusses how the ECB carries out its supervisory functions and the need for coordination with national competent authorities (NCAs). It also discusses the Single Resolution Mechanism (SRM), particularly the role of the Single Resolution Board (SRB) in ensuring that banks can be resolved in a centralized and coordinated manner and the role of the ECB in coordinating with the SRB. In this context, the legal and policy issues raised by the ECB’s role are discussed along with the questions it raises concerning the SRB’s effectiveness. The chapter concludes with future challenges facing the Banking Union including the need for further integration in banking markets and the need for the ECB as a supervisor to address emerging risks such as environmental sustainability risks.