This paper explores the potential effects (and side effects) of negative rates in theory and examines the evidence to determine what these effects have been in practice in the euro area.
In this blog, the authors argue that two aspects of the European resolution framework are particularly in need of reform – the bail-in regime and the resolution mechanism for cross-border banks – and propose a reform of both.
This members-only event welcomes Jan Reinder De Carpentier, Vice-Chair of the Single Resolution Board for a conversation with an invited audience.
Join us for the launch of the eighth edition of the 'Euro Yearbook'
The EU framework for crisis management and state aid in the banking sector urgently needs updating.
The European Union has made significant progress to a more unified banking market but frictions remain between euro and non-euro countries. Without a coordinated approach to remaining issues in completing banking union, the gap could widen.
In revived discussions on European banking union, some have suggested a new regime to deal with failing banks, alongside existing ones, drawn from parts of the United States’ bank resolution framework. This fragmented approach could be counterproductive. Europe should adopt a unitary regime, like the US, that applies to all banks irrespective of size.
Invitation only event to discuss the banking union.
Europe has a heavily bank-based financial structure, but bank-based financial structures are associated with higher systemic risk than market-based financial structures. The higher level of systemic risk in Europe suggests caution when pursuing policies that stimulate risk taking and debt creation by banks, especially in the wake of COVID-19. Priority should be given to financial diversification and equity finance.
Meeting the fiscal demands of COVID-19 will require the European Union to borrow on capital markets more than ever, and for European pension funds and households to look more widely for ways to build their nest eggs safely. The EU should take the challenges of the pandemic and Brexit as a chance to get its financial infrastructure house in order.
Evaluation of the global reforms implemented to deal with "too-big-to-fail banks".
Though outside the euro area, Denmark and Sweden could benefit from joining the European Union’s banking union. It would provide protection in case of any need to resolve at national level a large bank with a Scandinavian footprint, and would mark a choice in favour of more cross-border banking. But joining the banking union would also involve some loss of decision-making power.