Jovan ZAFIROSKI

Jovan ZAFIROSKI

Assistant professor at the Faculty of law “Iustinianus primus”, Skopje Macedonia

E-mail: zafiroski2000@yahoo.com

European banking union – what the financial crisis in Cyprus tells us?

 

Abstract

The recent developments in Cyprus and its banking sector has revealed the imperfections of the European Monetary Union and the fragility of the EU banking sector as a crucial element for the transmission of the monetary policy decided on European level and highly important for the functioning of the integrated European economy. The banking a crisis in Cyprus has occurred in the period following the agreement for the creation of the Single Supervisory Mechanism considered a first step forwards a complete banking union in Europe fulfilling the gap between the need for stability of the financial system and the idea for more integrated financial system in the EU. The SSM should de-link the banks from the sovereign countries providing direct recapitalization of the eurozone banks by the European Stability Mechanism. This text argues that the banking crisis in Cyprus is a clear confirmation that an incomplete banking union could not obtain stability and soundness of the EU financial system. Further reforms in various areas such as the establishment of a unified bank resolution scheme and European deposit insurance mechanism are needed. The Single supervisory mechanism is a positive step but it might not be sufficient in order the stability and soundness of the entire financial system to be provided.

Proposed panel: PANEL 1:

The Crisis of Europe – Political and Economic Challenges