The first step in Europe’s banking union is achievable, but it won’t be easy

Nicolas Véron, 29 October 2012

Eurozone leaders are firmly committed to a banking union, at least on paper. But do Member States agree on the current proposals? And what do these proposals leave out? This column argues that a dangerous combination of disagreements between Member States over contentious issues and pitfalls in the design of new institutions may well ensnare the Eurozone along its faltering path towards recovery.

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The leaders of Eurozone countries issued an unprecedented commitment on 29 June; the statement began, “[w]e affirm that it is imperative to break the vicious circle between banks and sovereigns” (Euro Area Leaders 2012).

Topics: EU institutions, Europe's nations and regions
Tags: crisis management, ECB, EZ banking union

Related

The first step in Europe’s banking union is achievable. But it won’t be easy.

, 1 January 1970

Eurozone leaders are firmly committed to a banking union, at least on paper. But do Member States agree on the current proposals? And what do these proposals leave out? This column argues that a dangerous combination of disagreements between Member States over contentious issues and pitfalls in the design of new institutions may well ensnare the Eurozone along its faltering path towards recovery.

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The leaders of Eurozone countries issued an unprecedented commitment on 29 June; the statement began, “[w]e affirm that it is imperative to break the vicious circle between banks and sovereigns” (Euro Area Leaders 2012).

Topics: EU institutions, Europe's nations and regions
Tags: crisis management, ECB, EZ banking union

Banking union as a crisis-management tool

Charles Wyplosz, 16 October 2012

Countries have various mechanisms that provide lending when a bank fails. But when bank problems far exceed available resources, central banks must be lenders of last resort, even when their role is clouded to mitigate moral hazard. This column explains the ECB is ill-equipped to act as such a lender; it doesn’t have enough control due to coordination problems across countries. The column argues this must change. The ECB must be the lender of last resort and this involves a Eurozone banking union.

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There can be no banking system without a lender of last resort. Some countries have various mechanisms that provide lending in first resort when a bank fails. This can be a deposit insurance agency, a rainy day fund fed by bank dues, or an understanding that banks rescue each other when the need arises.

Topics: EU institutions, Europe's nations and regions
Tags: crisis management, ECB, EZ banking union

Related

Crisis Management at Cross-Roads

16 November 2009 - 1 January 1970, Auditorium, National Bank of Belgium, Brussels

SUERF/CEPS/BFF Conference followed by SUERF Annual Lecture 2009

Sessions on:

    Provision of liquidity and Lender of Last Resort operations: effectiveness, governance, cross-border and cross currency issues
    Cross-border bank resolution
    Deposit guarantee schemes: How to re-establish clients’ confidence
    Limits of the "Lender of Last Resort", "Too big to fail" and "Too big to save" theses

Followed by the 2009 SUERF Annual Lecture to be delivered by Jaime Caruana, General Manager, Bank for International Settlements

Participation free of charge for members of SUERF, CEPS and the Belgian Financial Forum, non-members EUR 100

Organizer(s):
Michael Bailey
Type:
Conference
Location:
Auditorium, National Bank of Belgium, Brussels
Attendance:
Open attendance
Contact:
michael.bailey@oenb.at
Institution:
SUERF, CEPS and BFF
More information:
www.suerf.org

Disclaimer: Vox is not responsible for the accuracy of this information.

Topic(s):
Institutions and economics
Tags:
crisis management, Cross-Border Bank Resolution, Deposit Guarantee Schemes, lender of last resort

Crisis management in the EU

Sylvester Eijffinger, 4 December 2008

This column introduces the newest Policy Insight on what the EU has been doing and should be doing in terms of managing the global crisis.

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The ECB is doing crisis prevention in many ways, in particularly through promoting co-ordination and co-operation between national supervisors, mainly through the ESCB Banking Supervision Committee, and providing liquidity management on the inter-bank markets.

Topics: EU policies, Financial markets
Tags: crisis management, EU, financial crisis, monetary policy

The IMF as a reserve manager

Michael Bordo, Harold James, 18 June 2008

The IMF needs a new job. This column makes the case for the bold proposal that the IMF should manage a significant part of the new surplus countries’ sovereign wealth funds.

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In the original conception of the 1944 Bretton Woods Conference, the International Monetary Fund (IMF) was created to deal with problems that had afflicted the interwar world, particularly the lopsided distribution of reserves and the deflationary consequences for the international economy – as well as with crisis management.

Topics: International finance
Tags: crisis management, IMF, reserves

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