Relations between EU bodies in the Banking Union

This chapter examines the complex relationships among EU bodies within the Banking Union, emphasizing horizontal cooperation in micro- and macroprudential oversight. The creation of the Single Supervisory Mechanism (SSM) and Single Resolution Mechanism (SRM) marked major steps in financial integration, yet challenges remain, due to the division of competences between EU and national authorities. A key issue is the separation of regulatory and supervisory powers, particularly between the European Central Bank (ECB) and the European Banking Authority (EBA). Rigid regulatory frameworks often limit supervisory flexibility, as seen in the handling of non-performing loans (NPLs). Governance and coordination in macroprudential supervision remain fragmented, requiring soft law and peer pressure to harmonize policies, notably during the Covid-19 crisis. Despite functionality, the framework suffers from overlaps, uncertainty, and high compliance costs. The authors advocate reforms to enhance flexibility, clarify responsibilities, and expand ECB regulatory powers while ensuring democratic oversight.