The political dynamics behind Europe's new banking union

This article examines the political dynamics behind Europe's new banking union in two stages. First it examines the accretion of political power to two European institutions - the European Commission and the European Central Bank (ECB) - during the financial crisis, emphasising the ways in which the European Central Bank (especially under Mario Draghi) altered the relationship between principals and agents in the European institutional architecture. Second, it process-traces the policy conflicts and compromises that led to a Europeanisation and centralisation of bank supervision, recapitalisation, recovery and resolution in a remarkably short two years - a transfer in sovereignty to the supranational level equal to that involved in the creation of Economic and Monetary Union. The article argues, contrary to other analyses that stress the intergovernmental nature of the process and the bargains concluded, that the emergence of banking union reflected something of a neo-functionalist logic whereby supranational actors successfully interpreted the crisis as requiring supranational solutions, and shaped the outcomes in the face of sometimes fierce member state opposition.