Banking Union membership and the quality of democracy in Central and Eastern Europe – the case of Hungary

This article examines the relationship between democratic backsliding and Eurozone integration through the case of the Banking Union (BU) and the Single Supervisory Mechanism. While existing literature has mainly emphasized the democratic costs of post-crisis Economic and Monetary Union governance, this study explores the opposite relationship: whether remaining outside the Eurozone and the BU may facilitate democratic deterioration. Drawing on Europeanisation theory, the article argues that BU membership may unintentionally strengthen democratic resilience by limiting supervisory home bias, reducing opportunities for regulatory capture, and constraining politically motivated intervention in the banking sector. Using process tracing, the article analyses European Union, European Central Bank, European Banking Authority, and national supervisory documents and applies the findings to the Hungarian case, supplemented by some Polish examples. The study identifies several supervisory areas where nationally controlled supervision may enable politically selective practices and support crony capitalism. In contrast, the Single Supervisory Mechanism’s supranational supervisory framework, multinational Joint Supervisory Teams, common methodologies, and transparency requirements reduce the scope for such practices. The article concludes that participation in the Banking Union may indirectly contribute to democratic resilience by constraining institutional mechanisms that can support democratic backsliding.