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Can the banking union work without common deposit Guarantees? The initial market assessment and policy implications☆

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  • Ferri, Giovanni
  • Pesic, Valerio

Abstract

In late 2013 the European Central Bank (ECB) announced the list of candidate banks to its direct surveillance under the Single Supervisory Mechanism (SSM). Moving towards the European Banking Union (BU), the SSM fundamentally transformed the landscape of financial supervision in Europe since its inception. After several years, the BU is still incomplete, particularly in terms of depositors’ protection. Through this paper we assess empirically how markets valued the SSM in its path to implementation, and gauge whether they judged the SSM in itself sufficient to guarantee the stability of the European banking system, or whether they deemed the presence of an adequate Deposits Guarantee Scheme (DGS) as relevant. Based on six events from October 2013 to October 2014 for 96 European banks, our results suggest that the initial market assessment assigned little relevance to the presence of a DGS to guarantee the stability of the European banking system.

Suggested Citation

  • Ferri, Giovanni & Pesic, Valerio, 2025. "Can the banking union work without common deposit Guarantees? The initial market assessment and policy implications☆," International Review of Economics & Finance, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003223
    DOI: 10.1016/j.iref.2025.104159
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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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