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The subprime crisis and the sovereign debt crisis have triggered a process of fragmentation within the European banking sector, which affects monetary policy transmission. The ECB has implemented several unconventional measures in order to fight deflation and restore transmission mechanisms. While deflation remains a threat, unconventional measures have helped to repair monetary transmission mechanisms in the periphery. Nevertheless, the viability of the euro area must be improved through further financial integration. This is the aim of the banking union that gives the ECB new powers to supervise the European banking sector. While we acknowledge that this is a major step in the right direction, we also point out that several difficulties remain. We must remember that financial stability is not guaranteed, since the resolution fund will not be rapidly and fully operational. JEL classification: E4, E5.