A differentiated leap forward: spillover, path-dependency, and graded membership in European banking regulation

The banking union constitutes not only a major advance in supranational economic integration but also increases differentiated integration among the member states of the European Union. Although the banking union is open to all EU member states, only euro area countries participate. Other member states have been opponents, bystanders, or interested non-participants. This article explains the variation in participation as a result of path-dependency arising from the original differentiation between euro area countries and the rest of the EU. In the euro crisis, these two groups of member states were subject to differential pressure to integrate further. In addition, the banking union reinforced the causes that had led to the original differentiation of the monetary union. This path-dependency overrides variation in sector-specific economic interests, governance capacity, and policy paradigms that might otherwise explain governmental preferences in banking regulation. These factors can, however, par...