Banking union through the back door? How European banking union affects Sweden and the Baltic States

Swedish decision-makers opted out of the European banking union (EBU) despite the large cross-border presence of Swedish banks in Estonia, Latvia, and Lithuania. The three Baltic states, on the other hand, have already joined the eurozone and are part of the EBU. This article identifies three important domestic considerations that have shaped Sweden's position. Firstly, Swedish decision-makers were concerned that member states outside the eurozone would not fully participate in EBU decision-making. Secondly, they were reluctant to pay for the recapitalisation or resolution of distressed non-Swedish banks in other EU countries. Thirdly, Sweden preferred to retain regulatory autonomy in crisis management. The article relates Sweden's position to the overall cautious approach of other non-eurozone members such as the UK and Denmark. Nevertheless, it highlights the enhanced role of the European Central Bank (ECB) in banking supervision not only for eurozone insiders such as Estonia, Latvia, and Lithuania but also for member states outside the Eurozone such as Sweden.