The European Banking Union: will it be sufficient to avert another debt crisis in Europe?

The European Banking Union (“EBU”) came into existence to help address crucial problems caused by the global financial crisis (“GFC”) and subsequent European sovereign debt crisis (“SDC”). In order to reinstate stability and credibility back into the European banking system, a stronger and more centralized set of criteria was required, to avert another debt crisis in Europe. Whether the EBU is sufficient, however, remains to be seen. Nonetheless, The EBU is a significant step towards a genuine Economic and Monetary Union (“EMU”). It enables the application of consistent banking rules, with new tools and procedures designed to result in a more unified, transparent and safer marketplace for banks. The EBU currently has two functioning pillars consisting of the SSM and SRM respectively. A third pillar, although not yet operational, is in the pipeline in the form of the European Deposit Insurance Scheme (“EDIS”). These pillars are underpinned by the Single Rulebook (“SR”), which provides administrative and legal standards to ensure the efficient distribution of supervision, regulation and governance procedures.


A EUROPEAN BANKING UNION PRIMER
The EBU came into existence to help address crucial problems caused by the global financial crisis ("GFC") and subsequent European sovereign debt crisis ("SDC"). In order to reinstate stability and credibility back into the European banking system, a stronger and more centralised set of criteria was required. It was seen as a formula which would bring balance into the financial sector 2 . Vitor Constancio has described the EBU as "a transfer to the European level of the regulatory and institutional framework, responsible for safeguarding the robustness and stability of the banking sector" 3 . The EBU is a significant step towards a genuine Economic and Monetary Union ("EMU") 4 . It enables the application of consistent banking rules, with new tools and procedures designed to result in a more unified 5 , transparent 6 and safer 7 marketplace for banks 8 .
The EBU currently has two functioning pillars consisting of the SSM and SRM respectively. A third pillar, although not yet operational, is in the pipeline in the form of the European Deposit Insurance Scheme ("EDIS") 9 . These pillars are underpinned by the Single Rulebook ("SR"), which provides administrative and legal standards to ensure the efficient distribution of supervision, regulation and governance procedures 10 . The SR also includes rules on resolution and recovery procedures, a harmonised framework for the EDIS when it comes into play in 2017, and rules on capital requirements. The EBU ensures the consistent application of these rules across participating member states 11 .

RATIONALE FOR THE EUROPEAN BANKING UNION
"The double whammy of the international financial crisis and the sovereign debt crisis" 12 is pivotal in having led to the creation of the EBU. These inter-related events highlighted the major deformities and shaky foundations on which Europe's financial framework rested. To prevent the European financial structure from collapsing 13 , it was necessary to revisit the existing financial architecture in order to improve it with underpinning structures of economic growth and financial stability 14 . The crises identified major structural problems and had "shaken to its foundations the banking system of the Eurozone" 15 . A serious design flaw in Europe's financial architecture was due to the absence of resolution and supervision mechanisms 16 . This had led to a previously flawed supervisory model, which proved to be crucial in justifying the sceptics who doubted whether the so-called financial trilemma of a stable financial system, national financial policies and financial integration, were simultaneously compatible 17 .
The failure of financial institutions operating both globally and cross-border within Europe, was due to weak structural laws in co-ordination and co-operation and given the inter-connectedness of financial institutions, it soon became a systemically important issue 18 . These failed financial institutions revealed the level of distrust that was apparent amongst national supervisors 19 . As a result, when it came to dealing with cross border issues, such as in the Icelandic banks and Fortis case, rather than following a supra-national approach, regulators followed a national one 20 . Consequently, three main problems became apparent: 1. The macro-prudential oversight framework in the EU, which monitors systemic risk, was nonexistent; 2. The collapse of Icelandic banks exposed a failure in "home country control" 21 ; 3. The Fortis case highlighted issues in the cross-border framework in relation to bank resolution and crisis management 22 .
Political factors also compromised the "credibility of rule-based frameworks for co-ordination of national fiscal policies in the Euro area" 23 . For example, the Stability and Growth Pact ("SGP") was intended to protect public finances and prevent Eurozone members, by enforcing budgetary discipline, from embracing fiscal policies, leading to unmanageable debt levels 24 . However, lenient enforcement of the SGP, due to a loophole in the Maastricht Treaty, led to the SGP becoming a political bargaining chip in the EU, at the expense of important economic issues 25 . "As a result, European financial stability was hampered. Colossal pre-crisis and private debt piles, a flawed macro economic framework and an absence of institutions capable of handling effectively a cross border banking crisis had simply been ignored for far too long 26 … The incomplete institutional design was the true mark of an imbalanced and disjointed monetary union, also characterized by the absence of effective fiscal convergence mechanisms to enforce budget discipline" 27 .
In the midst of crisis, members of the Eurozone fought the crisis and supported bailout mechanisms, which led to the formation of the so-called European Financial Stability Facility ("EFSF") 28 . Simultaneously, the EBU, based on structures safeguarding centralisation of bank supervision, deposits insurance arrangements and a central crisis resolution mechanism 29 -was founded.

OBJECTIVES OF THE EUROPEAN BANKING UNION
The EBU, as an essential component of the EMU and internal market, ensures that banks abide by a harmonised set of rules regarding resolution and supervision 31 . These rules are specifically designed to ensure that banks do not take unnecessary risks, with the erring bank paying for its mistakes with the possibility of closure, whilst minimising taxpayer costs 32 . Adherence to the rules is crucial in order to avert another crisis. It is important in this regard to ensure that banks are robust, there is minimal market fragmentation and financial stability is secure 33 . Light-touch supervision and self-regulation are ineffective in the financial sector 34 .

PROTECT EU TAXPAYERS' MONEY
The 2008 GFC encountered enormous bank bailout packages, like that of Fortis 35 and the Royal Bank of Scotland 36 , who were funded by the taxpayer to safeguard against failure. A main objective of the EBU is to protect EU taxpayers' money should another crisis ensue. Despite policy-makers' best efforts to provide all the necessary tools 37 , for instance the un-tested Basel III and new EBU frameworks, Georg Ringe 38 argues that this objective is far from complete, stating that: "In my opinion the union in its current agreed-on incarnation is unable to handle major incidents. Depositors and short-term creditors enjoy insufficient protection in the event of a collapse, and chances are that the stabilization of large banks will, again, be at the expense of EU taxpayers" 39 .
According to Jeffrey Gordon 40 , it is not possible to rely on the so-called Single Resolution Fund ("SRF"), intended to come into play when a bank is in crisis and Basel III requirements, because it will not be enough to absorb a shock 41 . Instead, Gordon  A banking system that is resilient, serving society and the economy productively, while not being founded on moral hazard, is pivotal 44 . For example, the EBU's new bail-in regime should, theoretically, discipline the market, consequently reducing moral hazard, whilst improving the standard of risk taking. As a result, Benoit Lallemand 45 argues that lending will improve in the real economy, banks will become more diversified and financial stability will be strengthened 46 . In essence this would mean that banks are transparent, sustainable and effective, with funds financing the economy 47 .
Conversely, many banks have a high degree of inter-connectedness due to being part of a bigger megabank structure 48 . Until these structures are broken down, the bail-in tool may not be workable, as supervisors will not want to provoke a domino of bank failures 49 . Without any sort of structural reform on the issue of too-big-to-fail, the EBU could potentially make matters worse by federalising risk and thus re-igniting the issue of moral hazard 50 . Given that "we are still [living] in a paradigm where it's all up to the financial markets to decide what is good or not" 51 , reforms must be made in this area if confidence is to be restored.

RESTORING CREDIBILITY OF THE FINANCIAL SECTOR
The new EBU framework of improved regulation of the financial system, with better supervision and resolution mechanisms, can be said to be the starting point for restoring the credibility of the financial sector 52 . The SSM ensures there is constant rigorous and independent supervision while the SRM ensures the smooth resolution of banks 53 . Ultimately, these mechanisms will increase confidence and financial stability within Europe and therefore the credibility of the financial sector 54 .
The author would argue however, that in order to restore credibility in the banking sector, improvements have to go beyond better regulation. A change in financial sector culture, which implants appropriate behaviours and values, is also required 55 . According to John Mellor 56 , "responses from regulators to the failure in bank governance and standards of conduct revealed by the Financial Crisis, fall short of what is needed to restore credibility and trust in the financial sector" 57 . What is required is the restoration of financial ethics, behaviours and values 58 .
As highlighted by the Larosiere Report, proper governance establishes strong core values that underpin the ethos of a firm 59 . This culture comes from the top and is filtered into the organisation, which influences decision-making. However, the changing of culture is only a part of the bigger picture, but is an important element for the retention of trust 60 . In a speech by Mark Carney 61 , he stated that the 44 B Lallemand and F Keegan, "Executive Briefing" (2016), available at: http://webcache.googleusercontent.com /search?q=cache:p-JzfS9P554J:www.finance-watch.org/ifile/Press%2520coverage/Lafferty%2520Insights%2520OCT14%2520-%252 0Benoit%2520Lallemand%2520Interview.pdf+&cd=1&hl=en&ct=clnk&gl=uk. 45 Secretary General of Brussels based "Finance Watch". 46 Lallemand and Keegan (n 43). 47 Ibid. 48 Ibid. 49 Ibid. 50  financial sector still has a long way to go in restoring credibility and trust 62 . One only has to view past events driven by self-interest, to realise how much still has to be done before this objective can be achieved 63 .

BREAKING THE LINK BETWEEN MEMBER STATES AND THEIR BANKS64
The SDC highlighted the "vicious circle" that exists between member states and their banks 65 . Certain EU member states 66 were materially exposed as "lender of last resort to their domestic banks, whilst those domestic banks, in turn, held considerable amounts of sovereign debt issued by their home EU Member State and thereby exposed the creditworthiness of that state" 67 . To break the bank-sovereign nexus, an objective of the EBU is to ensure the cost of bank failure is borne by the private sector, not the taxpayer 68 . The introduction of the bail-in tool under the Bank Recovery and Resolution Directive (`"BRRD") is a crucial step towards this 69 .
As the author currently writes this paper however, it appears that the bank-sovereign "doom-loop is rearing its ugly head again" 70 . Italy is a case in point. Currently, Italy's debt is just under €2.2 trillion 71 , or about 133% of its annual economic output 72 . Despite this astronomical debt burden, and achieving the status of one of the world's most indebted nations, last year the Italian government managed to sell twoyear bonds at a negative yield 73 . Such a situation fails to instill the reasonable man with confidence in the financial sector 74 . It also leads to the important question of whether Italian banks own too much Italian government debt 75 . This situation has proved to be disturbing for the Single Resolution Board ("SRB"), whose objective is to ensure that Europe's banks remain on a stable foundation 76 . Despite the argument that Europe does not yet have the resources to handle a full meltdown of such magnitude, Italy is fast becoming "the greatest threat to the world's already burdened financial system" 77 .
It is clear that robust change is needed 78 . The German government and SRB have called for a 'ceiling' to be placed on banks' holding of sovereign debt. The SDC, and now Italy, has shown that the lethal connection between weak banks and risky sovereigns is a recipe for disaster 79 . If the link between the bank-sovereign were not severed, then rather than averting a future debt crisis, it would encourage it.

SINGLE SUPERVISORY MECHANISM
During the financial crises, due to EU member states applying inconsistent standards when evaluating banks, the Euro area became particularly affected. The rationale for a SSM, which is a supra-national prudential supervisory body, ensuring that the same rules apply to all "credit institutions" 81 and to permanently monitor performance 82 was created to make the Euro area more financially stable 83 and prevent "regulatory arbitrage" 84 .
As one of the main pillars, the SSM is both a supervisory mechanism and legal framework embedded in a functioning EBU architecture 85 . The legal structure consists of the SSM Framework Regulation 86 and the SSM Regulation 87 . Having regard to the proportionality principle 88 , under the SSM the ECB, as the ultimate supervisor 89 , has legal and prudential authority 90 to carry out key supervisory duties 91 for participating member states 92 in the EBU, with other supervisory tasks being assigned to national competent authorities ("NCAs") 93 . 80 The SSM ensures that banks comply with EBU rules and assesses whether banks are fit to operate 94 . The main objectives of the SSM are to: 1. Increase financial stability and integration; 2. Ensure that supervision is consistent; and 3. Ensure that the EU banking system is safe, healthy and resilient to outside shocks, like financial crises 95 .

DIVISION OF LABOUR
Labour has been divided between the ECB and NCAs. For example, the ECB supervises banks deemed "significant" 96 while NCAs supervise "less significant" 97 credit institutions 98 . However, supervision does not cover the shadow-banking sector 99 . The criteria that determine whether banks are significant, and therefore falling under ECB supervision, relate to the banks' economic significance, their size, cross border activities 100 and need for Eurozone support 101 . Essentially the most systemically important banks are supervised by the ECB with less important banks being supervised by NCAs 102 . The ECB however, has the overarching authority for every credit institution within the EBU framework 103 but several member states 104 have stated that the SSM should be restricted to systemically important institutions only. Given that local regional banks 105 are not systemically important because they are classed as low risk, it may be argued that supervising over 6,000 European banks is too onerous a task for the SSM 106 .

SUPERVISORY RESPONSIBILITIES
The ECB has far reaching powers and can conduct on-site inspections 107 and launch investigations 108 ; grant, revoke, limit or sanction 109 the business 110 ; conduct assessments 111 ; monitor compliance 112 ; and determine capital requirements 113 . ECB Regulation, accompanied by the CRD IV Directive 2013/36/EU provides "exclusive competence" on the ECB when a bank breaches, or risks breaching, its regulatory capital requirements and remedial action is needed 114 . The ECB's supervisory responsibilities depend on whether a credit institution is deemed 'significant' or not. Although for all credit institutions participating in the SSM, supervisory responsibilities include 115 : 2. Assessing the qualifying holdings of credit institutions 117 .
For significant credit institutions, the supervisory responsibilities of the ECB include 118 : 1. Assessment of passport applications 119 ; 2. Impose credit institutions with various prudential requirements 120 ; 3. Impose governance requirements on credit institutions, for example, leverage, liquidity and capital requirements 121 ; 4. Carry out stress tests and supervisory reviews 122 ; 5. Participate in supervising a financial conglomerate 123 ; and 6. Supervisory tasks are carried out in relation to recovery plans 124 .
Despite these detailed supervisory responsibilities, Andreas Dombret 125 has highlighted a weakness in the SSM structure. Dombret argues that supervisors are able to use their discretion when interpreting prudential national rules due to various available options under the law 126 . It is submitted that such a situation creates an un-level playing field, especially when a key objective of the SSM is consistent supervision.

CONFLICTS OF INTEREST
To prevent conflicts of interest, the legislation provides clear rules that identify the operational and organisational separation of power in the area of monetary policy and supervision 127 . According to Professor Avgouleas, supervision is a politically charged issue and given that the ECB is impartial and independent, this may be compromised. Therefore, it is crucial that this supervisory function is distinct from the ECB in order to preserve its autonomy. However, conflicts of interest are still deemed a concern. Bundesbank Deputy President Claudia Buch recently raised concerns calling "for a clearer line to be drawn between SSM activities and monetary policy, since both sets of tasks are housed at the ECB, with the ECB Governing Council as the supreme decision-making body. This set-up is a potential source of conflicts of interest, which only an amendment of the EU Treaties could resolve" 128 . This opinion is in line with that of Professor Isabel Schnabel 129 , who believes that conflicting interests are a noticeable issue because housing the SSM at the ECB has not only created an institution that is too powerful, but also an institution that may be open to abuse 130 .

JOINT SUPERVISORY TEAM
Supervision of a credit institution that is deemed 'significant', lies with the so-called 'joint supervisory team' ("JST"), which is an international team housed in Frankfurt 131 . The JST comprises staff of the national supervisors and ECB 132 and effective functioning is based on their co-operation with each other 133 . Having such a multi-talented and skilled team would undoubtedly be regarded as one of the JST's strengths. Yet having such a diverse set of individuals can also be problematic. Cyril Roux argues that: "The functioning of the JST's faces the combined management challenges of international public institutions, matrix structures and the tensions brought by the transfer of powers and responsibilities. Familiar in other contexts, these management challenges are specific to the conduct of supervision at a new supra-national level. Delivering consistent, timely and effective supervision, including the issuance and follow up of remediation programs, is proving challenging for issues that go beyond capital requirements. So too is keeping staff motivated through the complex network of national authorities and the ECB" 134 .

THE SUPERVISORY BOARD
The Supervisory Board ("SB") and Governing Council ("GC") control the SSM 135 . The SB is the prominent body of the ECB where debates take place on supervisory issues. Essentially, proposals are brought to the SB by the JST, with a view to making them a reality. The GC can either adopt or object the decisions 136 .
The SB and GC are composed of senior, skilled and experienced professionals, bringing both challenges and strengths to its function. The combined knowledge of personnel has been classed as "formidable" where decisions are challenged, debated and approached with the rigour necessary to provide a thorough analysis 137 . Yet there is an argument that the SB and GC do not have enough first hand experience in banking specific matters, making the process laboured and cumbersome at times 138 . It has also been argued that reducing the personnel and bringing in a new skill set that relates specifically to the banking sector would be far more effective 139 .
Furthermore, as every decision relating to prudential supervision goes through the SB and subsequently the GC because of EU legislative requirements; Cyril Roux argues that due to the centralised and blinkered decision making procedure, the whole process is no longer efficient: "Not a single decision, even the most routine and least consequential one, has been delegated. Electronic mailboxes of Supervisory Board members and Governors are clogged with a daily shower of insignificant written procedures, and unproblematic fitness and probity applications can take months to be processed. Legal impediments need to be lifted to make delegation possible and bureaucracy reduced" 140 .

ENFORCEMENT
It is the ECB's view that enforcement is a fundamental component of supervision. As yet, the SSM has not managed nor concluded a case by utilising their enforceability mechanism effectively 141 . It is submitted, that to supervise such a self-interested and insular industry effectively, and given that the SSM has "yet to find its feet as an enforcer", it is imperative that prudential regulation is an enforceable mechanism 142 . Despite the EBU being a "major step" towards enhancing the monitoring of risk and the 132 European Central Bank (n 81). 133 Roux (n 82). 134 Ibid. 135 Both the SB and GC are comprised of six ECB members and nineteen national members. For the SB, the deputy governor in charge of supervision is the national member. 136 Roux (n 82). 137 Ibid. 138 Ibid. 139 Ibid. 140 Ibid. 141 Ibid. 142 Ibid. efficient management of distress within the financial sector, it is submitted that further reforms and challenges lie ahead for the SSM 143 .

SINGLE RESOLUTION MECHANISM
The SRM 144 is the second pillar of the EBU and compliments the SSM. The SRM ensures the smooth resolution of banks. When a bank is failing or likely to fail, a new framework exists to resolve the problems and the Single Resolution Board ("SRB") 145 is the authority within the SRM to handle the resolution of those banks 146 .
Eurozone and EU member states participating in the EBU have signed an inter-governmental agreement on transferring finances and sharing them in a common SRF 147 designed to help ailing banks 148 . The fund is part of the SRM, which consists of the SRB, whose key objective is to plan and decide how to wind down or restructure banks that are no longer viable within the harmonised framework 149 . The SRM Regulation ("SRMR") 150 is correlated with the BRRD 151 , setting out a new recovery and resolution framework for credit institutions 152 within the EU 153 .

RATIONALE FOR THE SINGLE RESOLUTION MECHANISM
According to the initial legislative proposal for the SRMR, the European Commission ("EC") did not feel it was wise to leave the resolution of banks to the SSM, but instead have a separate SRM pillar, dealing exclusively with recovery and resolution with the help of National Resolution Authorities ("NRAs") in participating member states 154 . Once established the EC's view was that the SRM would detach risk arising from market skepticism; a lack of centralised system to deal with distressed banks; and the tensions arising between the ECB (as the SSM head body) and NRAs 155 . Moreover, apart from helping to avert any looming crises, the mechanism is expected to boost economic growth, due to confidence that Europe's banks are all using the same rulebook, thus stabilising expectations of investors, consumers and depositors in the marketplace 156 .   The SRM is also aimed at protecting public funds, taxpayers, and the economy as a whole, from the excessive costs from bank failures by applying and implementing effective and swift resolution procedures 159 .

SINGLE RESOLUTION BOARD
"The Single Resolution Board has been created to respond to the Euro area crisis… By avoiding bail-outs and worst-case scenarios, the SRB will put the banking sector on a sounder footingonly then can we achieve economic growth and financial stability" 160 .
The SRB, as the central decision maker, 161 consists of a full-time chair 162 , four full-time members 163 and a member appointed from each participating member state 164 . They are responsible for the functioning of the SRM in terms of adopting consistent and relevant plans in terms of 'significant', 'less significant' and cross border banks 165 . Moreover, due to the "potentially systemic nature of all [financial] institutions", the SRB and NCA work in co-operation with one another 166 . The ECB, as supervisor, has a Memorandum of Understanding ("MoU") with the SRB regarding information exchange and co-operation 167 , and will alert the SRB if a bank is in trouble or likely to fail. As well as the ECB, the SRB is accountable to the EC, the Council of the EU ("COEU") and the European Parliament ("EP") 168 , who have the power to object to proposed resolution procedures 169 . Having many policy actors can be viewed positively because of constant checks and balances but the down side is the potential for a multi-layered and bureaucratic political process resulting in an ineffective and overly complex system.

DECISION MAKING PROCESS
The decision making process is split between executive and plenary sessions 170 and there is a distinction between the two 171 . The SRB considers general issues correlated with the functioning of the SRM 172 . A plenary session consists of all members of the SRB 173 , EC and ECB representatives 174 . The voting procedure is a simple majority with the Chair having the deciding vote in the event of a tie 175 . Any resolution decisions involving the SRF over €5billion, will be decided in this session, while anything under this amount allows the SRB to make individual decisions 176 .

Executive Sessions:
An executive session is for the resolution, or potential resolution, of individual ailing banks. During this session, the SRB consists of the Chair and full-time SRB members 177 , along with the participating member state representative, the EC, ECB 178 and members representing member states in which there are bank subsidiaries 179 . Like the plenary session, the voting procedure is by simple majority with the Chair casting the deciding vote if there is a tie 180 .
Lucia Quaglia 181 has stated that due to the many policy actors that are involved 182 , the decision making process is extremely convoluted and there is a severe lack of clarity when it comes to understanding the overarching procedures 183 . Furthermore, the SRB is accountable to the EC, EP and COEU for any decisions that it makes 184 . The SRB is also required to submit annual reports 185 and to reply in writing to national parliaments, should they so request 186 . This arguably adds further layers of confusion, underpinned by political agendas and interferences. The voting procedure has also raised concerns because it has been argued that a simple majority does not go far enough and may allow larger banks to exert their authority 187 . Given that member states would not have a veto if they were against any decisions, it may potentially lead to problems 188 .

PHASE-IN PROCESS
Starting in 2015, the SRB has been responsible for collecting information in co-operation with NRA's for resolution planning activities 189 . The resolution planning is the preparation for an actual resolution case 190 . For each bank under the SRB's remit, an ex ante approach is adopted on how the crisis would be managed when/if it comes 191 . This preparatory phase also allows banks to have adequate internal resources to be able to finance whatever resolution strategy is most appropriate; this is the so-called minimum requirement and eligible liabilities element 192 . There will always be an element of risk attached to working on an ex ante premise as predicting future events can never be completely accurate 193 yet the nature of commerce is about future projections and these can only be calculated based on past events. 194 .
As of 1 st January 2016, the SRB became fully operational. Mauro Grande 195 stated the SRB "stands ready", but was also quick to point out that the main challenge is that the resolution framework in Europe is completely new. The "paradigm shift from bail-out to bail-in" is a new concept and it appears the SRB is learning and adapting as it goes along 196 . This fledgling approach instils little confidence in respect of averting another crisis.

SINGLE RESOLUTION FUND
Once the bail-in process and regular financing options have been exhausted, the SRB could draw on the SRF 197 , which will eventually total €55 billion and is financed by the banking sector 198 over an eight year period 199 . This will help limit costs to average European citizens and the real economy, which means that taxpayers no longer bail out failing banks, due to the eradication of national resolution funds, but are instead bailed in by investors 200 .
The purpose of the SRF is to ensure that the appropriate funding is available for a failing bank, but is not a bailout fund 201 . According to Article 76 of Regulation 806/2014, the SRB can utilise the SRF to compensate shareholders and creditors; to contribute to a bridge financing structure; purchase assets; make loans to the failing institution; to guarantee the assets or liabilities of the failing institution; and to contribute to failing institution 202 .
However, given that "the cost of bank failures should be borne by the financial industry and not by taxpayers" 203 , it is interesting to discover that the bridge financing structure comes from the national government if/when the SRF runs out of capital. Furthermore, in a recent speech, Mauro Grande stated that where the SRF does not have enough capital to finance a resolution case, then a financial backstop would be implemented, which is essentially a public bailout 204 -how the bank-sovereign nexus is to broken therefore, remains a mystery. This brings an argument by Claus Rosenkratz Hansen 205 into sharp focus, where he strongly argues that €55 billion will be nowhere near enough money to stabilise a systemically important bank 206 . One has to wonder if indeed "there has been a paradigm shift from bailout to bail-in" 207 , but also, given the inter-connectedness of banks and the potential risk of contagion, when one bank fails others undoubtedly follow.
These mechanisms are supposed to be in place to avert another crisis, yet it may actually contribute. A potential solution could be to break the bank structure down into smaller more manageable businesses, which would be easier to handle in the event of another crisis. 193 The Economist, "Does the past predict the future?" (2009) available at:

EUROPEAN DEPOSIT INSURANCE SCHEME208
Although not yet in force, the EC, in November 2015, put forward a proposal to implement the third pillar of the EBU with a EDIS. This is "a further step to a fully fledged Banking Union… which would provide a stronger and more uniform degree of insurance cover for all retail depositors" within the EBU 209 .
In its simplest form, the proposal by Lord Commissioner Hill intends to move the current system of national deposit guarantee schemes ("NDGS") to EDIS, which essentially underwrites deposits across the EBU 210 . EDIS applies to deposits below €100,000 of all EU banks. The purpose of EDIS ensures the equal protection of deposits within the EBU, regardless of which participating member state the funds were deposited 211 . A harmonised scheme ensures that banks would be better protected in the event of larger local shocks by thus relying on the central fund 212 . EDIS has several safeguards in place against moral hazard and abuse, which incentivise NDGS to manage risk prudently until EDIS takes over 213 .
EDIS will be cost neutral for the banking sector, which means that the contributions that were already being paid to NDGS will be switched to EDIS 214 . Riskier banks will pay higher contributions than safer banks so the process is risk weighted, which will be strengthened as EDIS is implemented 215 . There is also the crucial issue of the bank-sovereign nexus, where measures will be implemented to ensure that banks are adequately diversified 216 .
It is proposed to commence EDIS in 2017 based over a three-stage process.
1. The first stage involves the re-insurance of NDGS, which will last three years. In this stage the idea is that the NDGS is able to access EDIS funds, up to a certain amount, when all other options are exhausted. This first stage is said to weaken the bank-sovereign nexus, but does not go far enough to provide equal levels of protection for depositors 217 . 2. The second stage, starting in 2020, will see EDIS becoming gradually mutualised, but still subject to specific safeguards and limits with regard to abuse. The difference with this stage is that NDGS would not be required to exhaust its own funds before accessing EDIS funds. Thus introducing a higher risk between EDIS and NDGS 218 . 3. The final stage is a fully-fledged EDIS by 2024. This is done by gradually increasing the share of risk so that EDIS assumes 100% 219 .
Although not yet in force, and despite arguments to the contrary 220 , commentators, particularly German, have been highly critical of EDIS, especially Ludger Schuknecht 221 who states that: "There are no convincing answers to a number of important questions, such as this: Is this new European insurance product even necessary? How would incentives for governments, markets and banks change? Would more solidarity in this respect really lead to more stability in Europe? Is the proposal compatible with the foundations of the market economy and the subsidiarity principle in Europe? And what would it mean for the economic and political future in Europe?" 222 .
Angela Merkel has also been vocal as to why German depositors should be liable to help bail-out failing banks elsewhere within the EU as, she states, risk should first be minimised before proposals are tabled regarding shared responsibility 223 . "It is not hard to see why domestic politicians from the stronger economies would be extremely reluctant to assume open-ended responsibility for other countries' financial woes, as manifested in the state of their banks, given lines of responsibility and accountability to domestic populations" 224 . Given that EDIS is still being negotiated, it may be prudent to leave this part of the argument to rest for the moment.

CONCLUSION
That there are weak points of the emerging architecture of EBU is indisputable 225 . 'Political will', or the lack of it, in the form of national interests taking precedence over wider geographical concerns remains an obstacle to a more stable banking union. The legalities of what is permissible under EU law, in terms of strengthening the EBU structure without amendment to the Treaty, are also problematic 226 . These issues in particular have a knock on effect which spiral downwards, creating a multi-layered bureaucracy which is not always helpful when speedy decisions are called for. It is imperative, that with the speed of societal changes in modern times, the mechanisms that uphold the EBU have the flexibility to move at a rate to meet those needs. There are additional weaknesses in the structure. Reform is required on the "too big to fail" issue. Banks and financial institutions need to provide further capital backstops to absorb shock. A more uniform approach is required when interpreting prudential national rules. The argument also exists regarding housing the SSM at the ECB in that, that institution may be too powerful and open to abuse. The JST now faces the pressure of management challenges on a new supra-nationalist level. It is debatable whether the SB and GC have the right skill sets for the job. Are bail-in procedures really going to obviate the need for bail-outs? All these, and many more, controversial issues require to be debated extensively, and decisions made that strengthen the overall structure.
Whether in favour of its creation or not, given its handicaps, the EBU has done remarkably well. It has not had the luxury of remaining in an embryonic state for any length of time and, regardless of its tender years, has been forced to hit the ground running. What it has achieved in that time, in the form of improved regulation, supervision and resolution mechanisms, is significant.
Its main pillars in the form of the SSM and SRM (and proposed EDIS) are sturdy foundations on which to build a strong and shock proof structure. Of course the real proof of whether any piece of architecture can weather the storm is only ever evidenced after the event but that does not mean that every possibility to prevent damage is not considered ahead of time and every calculation done to mitigate loss.
The cost in human suffering can never be accurately weighed against monetary loss, but the two are indisputably linked in the effects of the GFC and SDC. People lost their jobs, their life savings, their homes and consequently many families broke up. For future disasters of a similar nature to be avoided, it is imperative that the players in the negotiation processes, responsible for building upon the structure of the EBU, put self-interest aside. If these players are capable of this, and additionally have the will as well as the ability to address the many diverse problems that weaken the structure, then the writer submits, albeit it is a mammoth task, the EBU would have the ability to avert another debt crisis in Europe.