Precautionary recapitalisation, a tool for public intervention in the banking sector defined in the Bank Recovery and Resolution Directive (BRRD), is a legitimate instrument for bank crisis management. The conditions set for it by BRRD are restrictive and have so far been effective to prevent its inappropriate use on insolvent banks. Outside of the scope of BRRD, the co-legislators should consider a reform of the EU audit framework to improve audit quality, and the European Stability Mechanism should be empowered to participate in future precautionary recapitalisations.
As regulators rush to strengthen banking supervision and implement bank resolution regimes, a macro approach to resolution is needed that considers both the contagion effects of bail-in and the continuing need for a fiscal backstop to the financial system. This can be facilitated through the completion of a banking union in which the European Stability Mechanism (ESM) becomes the fiscal backstop to the euro-area banking system.
At this event Tamim Bayoumi will present his upcoming book on the financial crisis, showing how how the Euro crisis and U.S. housing crash were, in fact, parasitically intertwined.
At this event we looked at the issue of non-performing loans in Europe. The event also saw the launch of the latest issue of "European Economy – Banks, Regulation and the Real Sector."
EU at Crossroads: How to respond to Misalignments in Bank Regulation and achieve a consistent financial Framework?
This invitation-only event will feature a presentation by Thomas Philippon of a report on bail-ins and bank resolution in Europe. Failed financial firms should not be bailed out by the taxpayers. Europe, unfortunately, has a weak track record of following this principle of good governance and sound economic policy. The banking union, with its new […]
On 14th June, Randall Henning will present his latest book on the Euro crisis and we will discuss how financial assistance should be governed in the euro area in the future.
The combination of banking union and Brexit justifies a reform of the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) in the near term, in line with the subsidiarity principle and the accountability of EBA and ESMA and their scrutiny by the European Parliament should be enhanced as a key element of their governance reform.
Many voices are calling for the ESM to be developed into a fully-fledged European Monetary Fund. But what changes would this entail, and how could the new institution be governed? The authors see both need and hope for change.
Dirk Schoenmaker's chapter in 'The Palgrave Handbook of European Banking', a handbook that collates the expertise and research of leading academic and senior policy makers in the field of European banking
Years after the start of the financial crisis, non-performing loans and private debt remain obstacles to the recovery of bank credit and investment.
As the Commission launches a review of European financial supervision, the authors argue that Europe needs to move towards a twin peaks model – dividing supervision of prudential and conduct-of-business issues. But this is a long-term vision, and will require institution building. The immediate priorities are to choose a new home for the EBA and reinforce ESMA.