The political agreement reached early on December 13 by Europe’s finance ministers makes it highly likely that legislation establishing a Single Supervisory Mechanism (SSM) with the European Central Bank (ECB) at its center will be enacted in March 2013. This is a big European success, high up on what was the range of possible outcomes. Read more
Bruegel blog
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Europe Takes an Important Step Forward on Banking
17th December 2012
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A banking union of 180 or 91%?
13th December 2012
The European finance ministers have agreed on a deal for the banking union. According to the deal, the ECB would be directly responsible for banks with assets exceeding 30bn euro or 20% of GDP, or at least the 3 largest banks of each country member for those nations where fewer than three fulfil the previous criteria. In this chart of the week, we applied the two criteria to the Banker dataset, which includes 754 banks in the euro zone, so 14% of the 5404 banks. In terms of assets, a comparison between the Banker database and ECB aggregate statistics shows a good overall coverage of the banking system. Read more
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Capital outflows in the euro area: is there a sign of relief?
13th December 2012
An update of the underlying data to September 2012 suggests that private capital outflows from a number of Southern European countries has showed signs of stabilisation, over recent months. Read more
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Where did smart money go in 2012?
11th December 2012
The short answer is: into the periphery of Europe. Read more
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Real exchange rate adjustments around the globe
10th December 2012
Real effective exchange rate adjustment trends in the aftermath of the global financial and economic crisis were generally not out of line with historical developments, and were in the right direction for a number of major currencies, though with major exceptions. The largely asymmetric impact of the crisis on advanced and emerging countries and their different outlooks call for an exchange rate adjustment between the two groups. Yet neither of the two groups is homogeneous and, in particular, a weakened euro exchange rate toward all trading partners would help to overcome the euro crisis. Read more
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Cooperation between home and host countries on the supervision of multinational banking groups
10th December 2012
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
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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