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Essay / Lecture

Europe’s radical banking union

Bruegel scholar Nicolas Véron argues in this thought-provoking essay that banking union ultimately enabled the European Central Bank’s announcement that it would buy large quantities of government bonds if needed and on the condition of a financial support programme.

By: Date: May 5, 2015 European Macroeconomics & GovernanceFinance & Financial Regulation Tags & Topics

Banking Union, even in its current incomplete form, is the single biggest structural policy success of the EU since the start of the financial crisis. This essay presents the sequence of events that led to its inception in late June 2012 and takes stock on its current status of implementation and prospects.

The essay argues forcefully that the political decision to initiate banking union was the decisive factor behind the ECB’s OMT programme, which put an end to the most acute phase of the euro area crisis, and that it also enabled the shift in the European approach to banking crisis resolution from bail-out to bail-in, which was prevented by the earlier policy framework of national banking supervision. In this sense, the banking union decision of mid-2012 was the crucial and largely unrecognized turning point of the entire euro area crisis.

The transfer of supervisory authority over all euro-area banks to the ECB, effective since last November, marks a profound change and is already resulting in more rigorous and consistent supervision.

After a few years of transition, the banking union framework can be expected to lead to a better integrated, more diverse and more resilient European financial system. It will also enhance European influence in shaping global banking regulatory standards and policies.

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Policy Contribution

PC 09 2017 coverEuropean Parliament

Carving out legacy assets: a successful tool for bank restructuring?

Separating ‘legacy assets’ from banks’ core business is central to the rehabilitation of Europe’s banking system. How can Europe progress in its ongoing effort to rid the financial system of legacy assets, and equip it with renewed growth?

By: Alexander Lehmann Topic: European Parliament, Finance & Financial Regulation, Parliamentary Testimonies Date: March 21, 2017
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Policy Contribution

PC 07 2017 cover

What happened to global banking after the crisis?

The global financial crisis allegedly led to the end of global banking. However, Dirk Schoenmaker finds that reports of the demise of global banking are premature.

By: Dirk Schoenmaker Topic: Finance & Financial Regulation Date: March 14, 2017
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Podcast

Podcast

Banks and borrowers in distress — Europe's NPL crisis

European banks are struggling with high amounts of non-performing loans. We look at the reasons behind this crisis, and how it affects banks, borrowers and the European economy as a whole. Finally, we explore potential solutions.

By: The Sound of Economics Topic: Finance & Financial Regulation Date: March 10, 2017
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Blog Post

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Nicolas Véron

Brexit should drive integration of EU capital markets

Brexit offers EU-27 countries a chance to take some of London’s financial services activity. But there is also a risk of market fragmentation, which could lead to less effective supervision and higher borrowing costs. To get the most out of Brexit, the EU financial sector needs a beefed up ESMA.

By: Dirk Schoenmaker and Nicolas Véron Topic: Finance & Financial Regulation Date: February 24, 2017
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Policy Brief

PB 17 01

Making the best of Brexit for the EU27 financial system

The EU27 needs to upgrade its financial surveillance architecture to minimise the financial market fragmentation resulting from Brexit and the corresponding increase in borrowing costs for firms.

By: André Sapir, Dirk Schoenmaker and Nicolas Véron Topic: Finance & Financial Regulation Date: February 8, 2017
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Blog Post

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Bruegel conference discusses strategies to tackle Europe’s NPL crisis

Bad loans and private sector debt distress are widely acknowledged to hold back investment and growth in Europe. It was good, then, to hear ECB Vice-President Vítor Constâncio call for a comprehensive strategy to address the non-performing loans problem at an event hosted by Bruegel last week.

By: Maria Demertzis and Alexander Lehmann Topic: Finance & Financial Regulation Date: February 7, 2017
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Blog Post

Silvia Merler

The strange case of the MPS capital shortfall

Italy's banking saga continues with the announcement that beleaguered MPS may need to find an additional €3bn. What exactly has changed, and what does it say about ECB decision making?

By: Silvia Merler Topic: Finance & Financial Regulation Date: December 27, 2016
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Policy Contribution

pc-23-12European Parliament

The impact of the legal and operational structures of euro-area banks on their resolvability

Following the financial crisis, the question of how to handle a big bank’s collapse has come to the fore. This Policy Contribution evaluates the obstacles to resolvability that the legal and operational structures of the large euro-area banks could pose to the European Union’s new resolution regime.

By: Dirk Schoenmaker Topic: European Parliament, Finance & Financial Regulation, Parliamentary Testimonies Date: December 6, 2016
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External Publication

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The impact of the legal and operational structures of euro-area banks on their resolvability

This paper evaluates the obstacles to resolvability that the legal and operational structures of the large euro-area banks could present, assuming that it is possible to liquidate smaller and medium-sized banks through a transfer of the relevant activities to other banks.

By: Dirk Schoenmaker Topic: Finance & Financial Regulation Date: December 6, 2016
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Working Paper

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Reform of the European Union financial supervisory and regulatory architecture and its implications for Asia

This Working Paper reviews recent developments in the EU’s financial supervisory and regulatory architecture with a view to draw out lessons for regional financial regulatory architecture in Asia.

By: Zsolt Darvas, Dirk Schoenmaker and Nicolas Véron Topic: Finance & Financial Regulation, Global Economics & Governance Date: November 17, 2016
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External Publication

claeys-ref-2016

What role for the financial markets in Europe?

The European European financial system is too strongly bank-based. How can it be rebalanced to become favourable to growth and employment again? (This paper is only available in French).

By: Grégory Claeys Topic: Finance & Financial Regulation Date: November 16, 2016
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Past Event

Past Event

Financial Stability Conference 2016

How can we fix the deficiencies in the EU financial system? Bank-state-nexus, business models and the missing level playing field

Topic: Finance & Financial Regulation Location: ESMT, Schlossplatz 1, 10178 Berlin Date: November 3, 2016
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