Transnational banks from the Eurozone dominate banking sectors in the post-communist EU member states. They tend to support the project of the banking union, which could present them with the single regulatory interface for all their EU markets and allow them to integrate internal capital markets that are fragmented by the national regulatory requirements imposed on their subsidiaries. However, not all host-countries at the Eastern periphery are keen to join the banking union and those outside of the Eurozone have to decide whether to stay-out, opt-in or potentially even opt-out later. Their choice is not fully independent, though. The single market rules afford transnational banks the legal option to convert existing subsidiaries that might stay out of the banking union, into the branches supervised by the home-supervisor - in most cases the European Central Bank managing the Single Supervisory Mechanism. This paper explores this interdependent choice and possible incentives of banks as well as national authorities to use the existing policy space for the opt-in or opt-out of the banking union. It concludes that eventually the new member states will opt-in to the banking union, despite their political and economic reservations [although this also depends on the final design of the Single Resolution Mechanism, which should be known by the time of the workshop].
