The formation of the European Union’s Banking Union will be accelerated to make the Economic and Monetary Union (EMU) more stable and resilient to shocks, announced the European Commission in a Communication published on October 11.

The Commission’s report comes ahead of the December Euro Summit, during which the Banking Union will be discussed.

“A complete Banking Union is essential for the future of the Economic and Monetary Union and for a financial system that supports jobs and growth,” said Valdis Dombrovskis, Vice-President for Financial Stability, Financial Services and Capital Markets Union. “We want a banking sector that absorbs crises and shares risks via private channels, thus ensuring that taxpayers are not first in line to pay. Today we are presenting pragmatic ideas to move forward with risk sharing and risk reduction in parallel. We hope that these will be useful food for thought for EU co-legislators to reach consensus on the remaining measures by 2018.”

The Banking Union, which was first proposed by the Commission in 2012, is aimed at placing the banking sector on a sounder footing and restore confidence in the euro. It is based on stronger prudential requirements for banks. And it consists of bank supervision, rules for managing failing banks, as well as improved protection for depositors.

The Socialists and Democrats (S&D) Group in the European Parliament, however, criticised the Commission’s plans to abandon the full insurance for depositors in the euro area known as the European Deposit Insurance Scheme (EDIS).

S&D Group spokesperson on economic and monetary affairs Pervenche Berès said: “We deeply deplore the Commission’s intent to drop the project of setting up a real European deposit insurance scheme as suggested in its communication adopted today. This represents a serious blow to completing the Banking Union.”

According to S&D Group negotiator, Jonás Fernández, the Commission’s decision to step back on its ambition to achieve the third pillar of the Banking Union is regrettable.

“From our point of view, only full mutualisation would ensure the appropriate level of protection for depositors and the risk sharing that contributes, in the end, to risk reduction,” he said.