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Should Denmark and Sweden Join the Banking Union?

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  • Svend E Hougaard Jensen
  • Dirk Schoenmaker

Abstract

An important policy discussion on joining the banking union is currently taking place in Denmark and Sweden. In this article we review the pros and cons of joining. The main rationale for joining the banking union is the importance of cross-border banking in the EU internal market. Reviewing the banking systems, we find that banks in Denmark and Sweden have the same cross-border characteristics as those in the euro area countries, suggesting a similar rationale for joining the banking union. Moreover, both countries have large banks which may be too big to save at country level, but not at the banking union level. Nevertheless, there are some governance concerns. While euro area countries have an automatic and full say in all banking union arrangements, the non-euro area countries (the ‘out’ countries) lack certain formal powers in ultimate decision-making; however, we find that this may be less of a problem in practice. If necessary, the ‘out’ countries would have the ‘nuclear option’ of leaving the banking union.

Suggested Citation

  • Svend E Hougaard Jensen & Dirk Schoenmaker, 0. "Should Denmark and Sweden Join the Banking Union?," Journal of Financial Regulation, Oxford University Press, vol. 6(2), pages 317-326.
    • Handle: RePEc:oup:refreg:v:6:y::i:2:p:317-326.
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    File URL: http://hdl.handle.net/10.1093/jfr/fjaa005
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    Cited by:

    1. María J. Nieto & Dalvinder Singh, 2021. "Incentive compatible relationship between the ERM II and close cooperation in the Banking Union: the cases of Bulgaria and Croatia," Occasional Papers 2117, Banco de España.
    2. Hilmar Þór Hilmarsson, 2020. "The Dangers of Banking Interconnectedness During Times of Crisis: The Nordic-Baltic Case," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 9(4), pages 153-161, December.

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