How much special treatment is needed and demanded in the context of European plans for banking union for banks that serve public interest and broader social goals? What are the implications for the construction of supervision, resolution and deposit guarantee systems?
This paper examines the role that certain kinds of banks play in guaranteeing public finance at the municipal and regional levels, and in lending to local economies, particularly small and medium-sized enterprises. It shows that while the existence of such banking was widespread before the crisis, the financial backing of state authorities has declined in Southern Europe and persisted in Northern Europe. This reduces the conflicts between the desire for uniform rules and regulations on banking union, but does not eliminate them. Special rules for particular kinds of banks within a broader banking union are likely the only practical solution.
