The EuropeanUnion must put an end to the negative feedbackloop between individual member states and their national banking systems.The European Central Bank (ECB) has taken decisiveaction to break this vicious circle.there is now a consensus that the 17 eurozone countries need a bankingunion to accompany their common currency. The European Commission has proposeda single rulebook for banks’ capitalrequirements; mutual support between national deposit guarantee schemes; andEurope-wide rules for resolving failing banks that place the main burden onbank shareholders and creditors, not on taxpayers.

Further work, however, is still needed in severalareas

The scope of the new supervisory mechanism.

The participation of non-eurozone countries in the newsupervisory scheme.

National supervisors’ role in the new system.In the current negotiations, we can still fine-tunethe roles of the European and national supervisors, but ultimate authority mustrest with the ECB.

Non-eurozone EU members that do not want to join thesingle supervisory mechanism.

Democratic accountability for the ECB’s newsupervisory powers.

Timing

The EuropeanUnion must put an end to the negative feedbacklo