With regard to oversight of multinational banks, supervisory authorities in home countries used to play a greater role than those in host countries. However, the recent global financial crises underlined the need for more intervention by host countries. As a host to many multinational banking groups, the Korean government needs to inspect whether there are regulatory loopholes in financial supervision, and to make greater efforts to strengthen global-level cooperation. Read more
Bruegel blog
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Cooperation between home and host countries on the supervision of multinational banking groups
10th December 2012
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Financial regulatory reforms in the UK and US to manage systemic risks and strengthen consumer protection
10th December 2012
Compared to micro-prudence of financial institutions, ‘systemic stability’ and ‘consumer protection’ are harder to achieve because they are beyond the reach of the ‘invisible hand’ and of individual supervisory authorities. For this reason, it is of utmost importance to clarify who are the responsible parties for financial systemic stability and consumer protection. An independent regulatory committee for each of systemic risk and consumer protection, with strong legal bases, is expected to work most effectively. Read more
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Lessons from the launch of the US Consumer Financial Protection Bureau
10th December 2012
The US government established the Consumer Financial Protection Bureau (CFPB) in 2011 as an independent agency accountable to Congress. Despite political pressures, the CFPB has taken various initiatives to enhance consumer protection in financial services. The case is a useful guide to the Korean government in terms of setting optimal level of roles and obligations in establishing an equivalent institution, while reducing uncertainty for financial firms by providing timely information on regulatory changes. Read more
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Blogs review: Robots, capital-biased technological change and inequality
10th December 2012
What’s at stake: What started as a discussion about the rise of automation in manufacturing – and its potential impact on “re-shoring” manufacturing to the U.S. by some firms – has turned into a broader discussion about the impact of capital-biased technological change on the future of jobs and inequality. The discussion also touches on the role of increasing mark-ups in the shift in income away from labor. Read more
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German wages grow faster than euro area average
7th December 2012
In 2012 German wages increased faster than in the rest of the European Union. In the first quarter German nominal wages and salaries increased by 2.1 percent compared to the same quarter in 2011 whereas they grew 1.6 percent in the euro area and 1.5 percent in the whole EU27 (year-over-year). During the second quarter of 2012 year-over-year growth rates increased a little more with nominal wages rising by 2.5 percent in Germany compared to 1.7 percent in the euro area and 1.9 percent in the EU27. Read more
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European antitrust fines: a new wave of deterrence?
7th December 2012
The European Commission just delivered the highest aggregate fine in its history for operating a cartel: €1.47bn (see Euractive). That comes at the end of a long investigation into collusion between TV-tube makers: the first dawn raids by the Commission's Competition Directorate-General took place in 2007. The case has some interesting economic and legal implications. Read more
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A genuine monetary union?
6th December 2012
The European Commission’s president, José Manuel Barroso, last week proposed a roadmap setting out how to transform Europe’s current set-up into a better-functioning monetary union. The paper has two major weaknesses, but it makes three very good and ambitious points. First, on the positive side, the communication stresses the need to move ahead with a common bank-resolution authority and acknowledges that a purely national system of resolution would not be effective. This is a major and very important change in the Commission’s policy stance: until very recently, the Commission’s view was that national resolution would suffice. A banking union without a common resolution authority would not be a genuine banking union. Without a common form of resolution, there can be… Read more
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Chart of the week: a deadly embrace
4th December 2012
Europe is determined to break the vicious circle between sovereigns and banks. To achieve this aim, it appears to be clear that Europe will need a strong central supervisor, a common resolution authority as well as the appropriate fiscal backstop to help in case of major crisis when the resources of the resolution fund are exhausted. As Europe is advancing its work on the banking union, the increased dependence of banks on their sovereigns in the last year has not received sufficient attention. An important reason for the link between banks and sovereigns is the fact that banks are holding government bonds on their books. Already before the crisis, European banks were holding large amounts of sovereign debt on their… Read more
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Blogs review: an update on the fiscal cliff
3rd December 2012
What’s at stake: On January 1, unless preventive legislation is enacted, the U.S. economy will be gripped by a fiscal contraction equal to around 4% of GDP. The lead negotiators for the White House and Congressional Republicans used the Sunday morning news to introduce their opening bids and defend their positions. Beyond the back and forth political process, the ongoing discussion poses the question of the optimal timing for fiscal contraction in a recovering economy.
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Chart of the week: updated monthly real effective exchange rates for 153 countries and the euro area
29th November 2012
Bruegel Working Paper 2012/06 includes data for 178 countries and the euro area, while the monthly database includes 153 countries and the euro area. We have updated the monthly database up to November 2012. November is not yet over and therefore we approximated the nominal exchange rate with the average during 2 to 26 November. Data of the last few days of the month may change this average, but presumably by not much. Consumer price indices are available till October for most countries and for a number of countries one or more earlier months are also missing. Similarly to the procedure of the Working Paper, we projected the missing data up to October 2012 and the not-yet available data of… Read more