The recent Eurogroup agreement on euro-area reform foresees a greater role for the European Stability Mechanism (ESM) as a backstop to the banking union. This is a welcome step forward but important issues remain. We assess the agreement on how to fund banks after resolution and the best way to organise the fiscal role in liquidity provisioning to banks. We argue that the bank resolution framework will remain incomplete and its gaps could result in important financial instabilities.
Banks deemed to be failing or likely to fail in the banking union are either put into insolvency/liquidation or enter a resolution scheme to protect the public interest. After resolution but before full market confidence is restored, the liquidity needs of resolved banks might exceed what can be met through regular monetary policy operations or emergency liquidity assistance. All liquidity needs that emerge must be met for resolution to be a success. In the euro area, this can only be done credibly for systemically important banks by the central bank.
The Minister of Finance from Spain discusses challenges ahead of the European Council in December
A year ago, a group of 14 French and German economists joined forces with the aim of forging common proposals for euro area reforms. Their report gave rise to a lively discussion among officials and academics. This Policy Insight summarises the group's proposals and also addresses some of the points raised in a subsequent VoxEU.org debate on the topic.
In this episode, Bruegel senior fellow Nicolas Véron joins Sean Gibson to discuss the recent Policy Contribution on how to better the European Union anti-money laundering (AML) regime, a paper he has co-written with Joshua Kirschenbaum.
A series of banking scandals in multiple EU countries has underlined the shortcomings of Europe's anti-money laundering regime. The impact of these shortcomings has been further underlined by changing geopolitics and by the new reality of European banking union. The imperative of establishing sound supervisory incentives to fight illicit finance effectively demands a stronger EU-level role in anti-money laundering supervision. The authors here detail their plan for a new European unitary architecture, centred on a new European anti-money laundering authority that would work on the basis of deep relationships with national authorities.
What is the economic potential and the risks of crypto assets? Regulators and supervisors have taken great interest in these new markets. This Policy Contribution is a version of a paper written at the request of the Austrian Presidency of the Council of the European Union for the informal ECOFIN meeting of EU finance ministers and central bank governors.
Bruegel senior fellow Nicolas Véron talks with Jörg Kukies, state secretary at the German finance ministry, about the next steps to the banking union project in Europe, as well as the potential challenges that lie ahead.
In its bid to join the single currency Bulgaria has made commitments on financial supervision but also wider structural reform which set a precedent for future applicants for participation in the exchange rate mechanism ERMII. Most conditions, though not all, are justified by the additional demands of the banking union. But the envisaged timeline seems ambitious, and verification will not be straightforward.
This event will feature the presentation of the Economic Survey of the European Union 2018 and Economic Survey of the Euro Area 2018.
This event will discuss the future of Banking Union.
Several euro area leaders, including the German chancellor, her finance minister, and the French president, have recently referred to the need to “complete the banking union.”. These public calls echo those made in more formal settings, and inevitably raise the question of what criteria should be used to assess the banking union’s completeness.