Cost of non-Europe – Banking Union and banking regulation to avert a new financial crisis | Epthinktank

The establishment of a fully-fledged Banking Union, resting on sound banking regulation, has the potential to help avoid significant recapitalisation costs and GDP loss in the coming years, by playing a key role in averting or containing any future financial and/or sovereign crisis. New research commissioned by the European Added Value Unit estimates the one-off cost of not having a fully-fledged Banking Union at European level to amount to 222.3 million euro per annum, in the case of a new sovereign debt crisis, or 195 billion, in the case of a new financial crisis.53 Although both crisis scenarios are distinct and non-continuous, a mid-range value of 209 billion euro has been chosen for the sake of simplicity. Since we know from experience that financial or banking crises affecting the European economy are tending to occur approximately once a decade, we have calculated that the annual cost of not implementing a Banking Union would be broadly equivalent to dividing this anticipated one-off loss by ten, so amounting to a cost of some 21 billion on an annualised basis.