Since the start of EMU monetary policy is centralised for the countries of the Euro area. In contrast to that main responsibility for banking supervision remains with the national authorities. This allocation of competence is increasingly controversial. Critics argue that regulatory divergence in supervision is not any longer compatible with the achieved convergence in monetary and exchange rate policy. With this background the project focuses on the following question: Is the institutional status in EU banking supervision quo still appropriate to safeguard stability of the European banking system? In a first step it is analysed whether systemic risk has still a predominantly national or already a European character. In regard to the institutional setting the cooperative instruments of EU banking supervision are scrutinised with regard to their ability to take care of cross border risks. In the theoretical part a principle agent model will be applied to learn more about the consequences of centralisation of the supervisory system. Finally a political-economic approach will be used to look for driving forces behind the system's evolution. For that purpose the personal interest of important actors will be related to the different available reform options.