Dirk Schoenmaker - Academia.edu (original) (raw)
Papers by Dirk Schoenmaker
European Union countries offer a unique experience of financial regulatory and supervisory integr... more European Union countries offer a unique experience of financial regulatory and supervisory integration, complementing various other European integration efforts following the second world war. Financial regulatory and supervisory integration was a very slow process before 2008, despite significant cross-border integration especially of wholesale financial markets.However, the policy framework proved inadequate in the context of the major financial crisis in the EU starting in 2007, and especially in the euro area after 2010. That crisis triggered major changes to European financial regulation and to the financial supervisory architecture, most prominently with the creation of three new European supervisory authorities in 2011 and the gradual establishment of European banking union starting in 2012. The banking union is a major structural institutional change for the EU, arguably the most significant since the introduction of the euro. Even in its current highly incomplete form, and ...
The move to European Banking Union involving the supervision and resolution of banks at euro-area... more The move to European Banking Union involving the supervision and resolution of banks at euro-area level was stimulated by the sovereign debt crisis in the euro area in 2012. However, the long-term objective of Banking Union is dealing with intensified cross-border banking.The share of the assets of national banking systems that come from other EU countries was rising before the financial and economic crisis of 2007, but went into decline thereafter in the context of a general retrenchment of international banking. Most recent data, however, suggests the decline has been halted. About 14 percent of the assets of banks in Banking Union come from other EU countries, while about a quarter of the assets of the top 25 banks in the Banking Union are held in other EU countries.While a crisis-prevention framework for the euro area has largely been completed, the crisis-management framework remains incomplete, potentially creating instability. There is no governance mechanism to resolve dispu...
Policy briefs, 2016
Real economic imbalances can lead to financial crisis. The current unsustainable use of our envir... more Real economic imbalances can lead to financial crisis. The current unsustainable use of our environment is such an imbalance. Financial shocks can be triggered by either intensified environmental policies, cleantech breakthroughs (both resulting in the stranding of unsustainable assets), or the economic costs of crossing ecological boundaries (eg floods and droughts due to climate change). Financial supervisors and risk managers have so far paid little attention to this ecological dimension,...
Policy Contributions, 2016
Highlights For the full references and the annex, please see the PDF version of this publication.... more Highlights For the full references and the annex, please see the PDF version of this publication. In the aftermath of the global financial crisis, the market share of US investment banks is increasing, while that of their European counterparts is declining. We present evidence that US investment banks are on the verge of taking over pole position in European investment banking. Meanwhile, since 2015, Chinese investment banks have overtaken American and European investment banks in the Asia-Pacific market. Credit rating agencies and investment banks are the gatekeepers of the capital markets. The European supervisory institutions can effectively supervise the European operations of these US-managed players. On the political side, we suggest that the European Commission should continue to view its, albeit declining, banking industry as a strategic sector. The Commission, the European Central Bank and the Bank of England should jointly develop a strategic agenda for the EU-US Regulator...
Erasmus Research Institute of Management - ERIM Research Paper Series, 2017
Housing bubbles are a well-known source of financial instability. In addition, given the importan... more Housing bubbles are a well-known source of financial instability. In addition, given the importance of this sector to the economy, the collapse of such bubbles tends to be followed by deeper recessions and slower recoveries than other crises, as the recent boom-bust housing cycles in many countries have clearly demonstrated. In the European union, the policy instruments available to address this and to prevent future housing bubbles are implemented either at the national level (macroprudential policies) or at the euro-area level (monetary policy). However, recent research suggests that house price developments and bubbles are above all a local phenomenon. There are significant regional differences in house price developments within EU countries, in particular between capital cities and other regions. Our results suggest that house price fluctuations in capital cities tend to be more volatile and stronger than in the rest of the countries, warranting more targeted measures at the loc...
English common law is the choice of law for financial contracts, even for parties in EU members w... more English common law is the choice of law for financial contracts, even for parties in EU members with civil law systems. This creates a lucrative legal sector in the UK, but Brexit could make UK court decisions difficult to enforce in the EU, say Uuriintuya Baatsaikhan and Dirk Schoenmaker. Parties will be able to continue using English common law after Brexit, but how will these contracts be enforced? Some continental courts are preparing to make judicial decisions on common law cases in the English language.
The European Union’s financial supervisory architecture is based on a sectoral model with separat... more The European Union’s financial supervisory architecture is based on a sectoral model with separate authorities for banking, insurance and securities and markets. New developments in the EU financial sector make this sectoral structure increasingly out of date: Brexit creates a need for strong EU-level wholesale market and conduct-of-business supervision to build an integrated capital market for the EU27; Mis-selling of bank bonds – that can be bailed in – to retail consumers has highlighted the need for a strong conduct-of-business supervisor for banking and other retail financial services, separate from prudential supervision to ensure a strong focus on the interests of consumers; Financial conglomerates, combining banking and insurance, make up about a third of Europe’s banking and insurance sector. Joined-up supervision would strengthen the prudential supervision of these conglomerates. To deal with these challenges, the EU should commit to a twin peaks model as a long-term visio...
Policy Contributions, 2016
This material was originally published in a paper provided at the request of the Committee on Eco... more This material was originally published in a paper provided at the request of the Committee on Economic and Monetary Affairs of the European Parliament and commissioned by the Directorate-General for Internal Policies of the Union and supervised by its Economic Governance Support Unit (EGOV). The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of the European Parliament. The original paper is available on the European Parliament’s webpage. © European Union, 2016. In the aftermath of the financial crisis, the question of how to handle a big bank’s collapse has arisen. Large banks perform functions that if disrupted could seriously damage the financial sector and the real economy. The European Union’s new resolution regime introduced by the Bank Recovery and Resolution Directive (BRRD) aims at orderly resolution of banks, with creditors – and to greatest the extent possible, not the taxpayer – bearing...
Extreme climate events related to global warming will happen somewhat randomly and could have a h... more Extreme climate events related to global warming will happen somewhat randomly and could have a huge cost for the most vulnerable countries. A global climate risk pool, with contributions from all countries, could help these vulnerable countries to recover from such events and might thus smooth the way towards a broader climate deal.
Policy Contributions, 2016
Highlights For political reasons, European Union member states’ opinions on joining banking union... more Highlights For political reasons, European Union member states’ opinions on joining banking union range from outright refusal to active consideration. The main stance is to wait and see how the banking union develops. The wait-and-see positions are often motivated by the consideration that joining banking union might imply joining the euro. However, in the long term, banking union’s ultimate rationale is linked to cross-border banking in the single market, which goes beyond the single currency. This Policy Contribution documents the banking linkages between the nine ‘outs’ and 19 ‘ins’ of the banking union. We find that some of the major banks based in Sweden and Denmark have substantial banking claims across the Nordic and Baltic regions. We also find large banking claims from banks based in the banking union on central and eastern Europe. The United Kingdom has a special position, with London as both a global and European financial centre. We find that the out countries could prof...
The issue of sustainable development has multiple aspects, all of which need to be considered if ... more The issue of sustainable development has multiple aspects, all of which need to be considered if sustainability is to be guaranteed. On the environmental front, climate change and depletion of natural resources are two factors that are threatening the earth’s ability to regenerate. On the economic front, development that does not pay sufficient attention to income inequality and provision of basic needs to all is a process in danger of imploding. This essay explores the role that finance can play to ensure that investment protects the environment and promotes economic systems that are internally sustainable. Dirk Schoenmaker argues that seeing the role of finance as one of allocating funding to productive investments in a narrow sense is no longer appropriate. What constitutes ‘productive’ cannot be independent of a project’s environmental and socio-economic impact because there are often trade-offs between short-term profits and long-term impact. What might appear to be a profitabl...
Copyright reserved. Subject to the exception provided for by law, no part of this publication may... more Copyright reserved. Subject to the exception provided for by law, no part of this publication may be reproduced and/or published in print, by photocopying, on microfilm or in any other way without the written consent of the copyright holder(s); the same applies to whole or partial adaptations. The publisher retains the sole right to collect from third parties fees payable in respect of copying and/or take legal or other action for this purpose.
The market for green bonds is growing rapidly and has been boosted by the European Commission’s p... more The market for green bonds is growing rapidly and has been boosted by the European Commission’s plan to raise through green bonds 30 percent of the up to €750 billion that will be borrowed under the Next Generation EU coronavirus economic recovery programme. But while green bonds can reduce the financing costs of green projects and technologies, their current design means they fall short of fulfilling their full potential. Issuing green bonds alongside regular bonds fragments bond issues, reducing liquidity and thus increasing financing costs. Moreover, green bond prices reflect liquidity, credit risk and environmental performance jointly, which makes it difficult to isolate the part of the return on the bonds that relates to environmental performance. We propose an alternative: issuance of regular bonds with attached green certificates that ensure earmarking for green purposes. The new design would lead to more liquid securities (as only regular bonds are issued), which would reduc...
textabstractBrexit will lead to a partial migration of financial firms from London to the EU27. T... more textabstractBrexit will lead to a partial migration of financial firms from London to the EU27. This Policy Contribution provides a comparison between London and four major cities that will host most of the new EU27 wholesale market: Frankfurt, Paris, Dublin and Amsterdam. It gives a detailed picture of the wholesale markets, the largest players in these markets and the underlying clearing infrastructure. It also provides data on professional services and innovation.
Both theory (game theory) and practice (recent financial crisis) indicate that national interests... more Both theory (game theory) and practice (recent financial crisis) indicate that national interests prevail in cross-border resolution. National authorities aim for the least-cost solution for domestic tax-payers. This results in an undersupply of the public good of global financial stability. International banks are increasingly run on national lines, as national supervisors force stand-alone subsidiaries to maintain separate liquidity and capital buffers in each jurisdiction. To preserve the Internal Market in Banking, this paper proposes a supranational approach to banking supervision and resolution in Europe. The large cross-border banks would then be supervised directly by the European Banking Authority, and in case of liquidity and solvency problems, have access to the ECB and a newly proposed European Resolution Authority. A European Resolution Authority needs a fiscal backstop and a strong legal framework to be credible. The access to governments funds can be based on ex ante ...
Erratum 6 December 2017 - Table 1, page 3. "Portugal is currently reviewing its supervisory ... more Erratum 6 December 2017 - Table 1, page 3. "Portugal is currently reviewing its supervisory model." The European Union’s financial supervisory architecture is based on a sectoral model with separate authorities for banking, insurance and securities and markets. New developments in the EU financial sector make this sectoral structure increasingly out of date - Brexit creates a need for strong EU-level wholesale market and conduct-of-business supervision to build an integrated capital market for the EU27; Mis-selling of bank bonds – that can be bailed in – to retail consumers has highlighted the need for a strong conduct-of-business supervisor for banking and other retail financial services, separate from prudential supervision to ensure a strong focus on the interests of consumers; Financial conglomerates, combining banking and insurance, make up about a third of Europe’s banking and insurance sector. Joined-up supervision would strengthen the prudential supervision of thes...
European Union countries offer a unique experience of financial regulatory and supervisory integr... more European Union countries offer a unique experience of financial regulatory and supervisory integration, complementing various other European integration efforts following the second world war. Financial regulatory and supervisory integration was a very slow process before 2008, despite significant cross-border integration especially of wholesale financial markets.However, the policy framework proved inadequate in the context of the major financial crisis in the EU starting in 2007, and especially in the euro area after 2010. That crisis triggered major changes to European financial regulation and to the financial supervisory architecture, most prominently with the creation of three new European supervisory authorities in 2011 and the gradual establishment of European banking union starting in 2012. The banking union is a major structural institutional change for the EU, arguably the most significant since the introduction of the euro. Even in its current highly incomplete form, and ...
The move to European Banking Union involving the supervision and resolution of banks at euro-area... more The move to European Banking Union involving the supervision and resolution of banks at euro-area level was stimulated by the sovereign debt crisis in the euro area in 2012. However, the long-term objective of Banking Union is dealing with intensified cross-border banking.The share of the assets of national banking systems that come from other EU countries was rising before the financial and economic crisis of 2007, but went into decline thereafter in the context of a general retrenchment of international banking. Most recent data, however, suggests the decline has been halted. About 14 percent of the assets of banks in Banking Union come from other EU countries, while about a quarter of the assets of the top 25 banks in the Banking Union are held in other EU countries.While a crisis-prevention framework for the euro area has largely been completed, the crisis-management framework remains incomplete, potentially creating instability. There is no governance mechanism to resolve dispu...
Policy briefs, 2016
Real economic imbalances can lead to financial crisis. The current unsustainable use of our envir... more Real economic imbalances can lead to financial crisis. The current unsustainable use of our environment is such an imbalance. Financial shocks can be triggered by either intensified environmental policies, cleantech breakthroughs (both resulting in the stranding of unsustainable assets), or the economic costs of crossing ecological boundaries (eg floods and droughts due to climate change). Financial supervisors and risk managers have so far paid little attention to this ecological dimension,...
Policy Contributions, 2016
Highlights For the full references and the annex, please see the PDF version of this publication.... more Highlights For the full references and the annex, please see the PDF version of this publication. In the aftermath of the global financial crisis, the market share of US investment banks is increasing, while that of their European counterparts is declining. We present evidence that US investment banks are on the verge of taking over pole position in European investment banking. Meanwhile, since 2015, Chinese investment banks have overtaken American and European investment banks in the Asia-Pacific market. Credit rating agencies and investment banks are the gatekeepers of the capital markets. The European supervisory institutions can effectively supervise the European operations of these US-managed players. On the political side, we suggest that the European Commission should continue to view its, albeit declining, banking industry as a strategic sector. The Commission, the European Central Bank and the Bank of England should jointly develop a strategic agenda for the EU-US Regulator...
Erasmus Research Institute of Management - ERIM Research Paper Series, 2017
Housing bubbles are a well-known source of financial instability. In addition, given the importan... more Housing bubbles are a well-known source of financial instability. In addition, given the importance of this sector to the economy, the collapse of such bubbles tends to be followed by deeper recessions and slower recoveries than other crises, as the recent boom-bust housing cycles in many countries have clearly demonstrated. In the European union, the policy instruments available to address this and to prevent future housing bubbles are implemented either at the national level (macroprudential policies) or at the euro-area level (monetary policy). However, recent research suggests that house price developments and bubbles are above all a local phenomenon. There are significant regional differences in house price developments within EU countries, in particular between capital cities and other regions. Our results suggest that house price fluctuations in capital cities tend to be more volatile and stronger than in the rest of the countries, warranting more targeted measures at the loc...
English common law is the choice of law for financial contracts, even for parties in EU members w... more English common law is the choice of law for financial contracts, even for parties in EU members with civil law systems. This creates a lucrative legal sector in the UK, but Brexit could make UK court decisions difficult to enforce in the EU, say Uuriintuya Baatsaikhan and Dirk Schoenmaker. Parties will be able to continue using English common law after Brexit, but how will these contracts be enforced? Some continental courts are preparing to make judicial decisions on common law cases in the English language.
The European Union’s financial supervisory architecture is based on a sectoral model with separat... more The European Union’s financial supervisory architecture is based on a sectoral model with separate authorities for banking, insurance and securities and markets. New developments in the EU financial sector make this sectoral structure increasingly out of date: Brexit creates a need for strong EU-level wholesale market and conduct-of-business supervision to build an integrated capital market for the EU27; Mis-selling of bank bonds – that can be bailed in – to retail consumers has highlighted the need for a strong conduct-of-business supervisor for banking and other retail financial services, separate from prudential supervision to ensure a strong focus on the interests of consumers; Financial conglomerates, combining banking and insurance, make up about a third of Europe’s banking and insurance sector. Joined-up supervision would strengthen the prudential supervision of these conglomerates. To deal with these challenges, the EU should commit to a twin peaks model as a long-term visio...
Policy Contributions, 2016
This material was originally published in a paper provided at the request of the Committee on Eco... more This material was originally published in a paper provided at the request of the Committee on Economic and Monetary Affairs of the European Parliament and commissioned by the Directorate-General for Internal Policies of the Union and supervised by its Economic Governance Support Unit (EGOV). The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of the European Parliament. The original paper is available on the European Parliament’s webpage. © European Union, 2016. In the aftermath of the financial crisis, the question of how to handle a big bank’s collapse has arisen. Large banks perform functions that if disrupted could seriously damage the financial sector and the real economy. The European Union’s new resolution regime introduced by the Bank Recovery and Resolution Directive (BRRD) aims at orderly resolution of banks, with creditors – and to greatest the extent possible, not the taxpayer – bearing...
Extreme climate events related to global warming will happen somewhat randomly and could have a h... more Extreme climate events related to global warming will happen somewhat randomly and could have a huge cost for the most vulnerable countries. A global climate risk pool, with contributions from all countries, could help these vulnerable countries to recover from such events and might thus smooth the way towards a broader climate deal.
Policy Contributions, 2016
Highlights For political reasons, European Union member states’ opinions on joining banking union... more Highlights For political reasons, European Union member states’ opinions on joining banking union range from outright refusal to active consideration. The main stance is to wait and see how the banking union develops. The wait-and-see positions are often motivated by the consideration that joining banking union might imply joining the euro. However, in the long term, banking union’s ultimate rationale is linked to cross-border banking in the single market, which goes beyond the single currency. This Policy Contribution documents the banking linkages between the nine ‘outs’ and 19 ‘ins’ of the banking union. We find that some of the major banks based in Sweden and Denmark have substantial banking claims across the Nordic and Baltic regions. We also find large banking claims from banks based in the banking union on central and eastern Europe. The United Kingdom has a special position, with London as both a global and European financial centre. We find that the out countries could prof...
The issue of sustainable development has multiple aspects, all of which need to be considered if ... more The issue of sustainable development has multiple aspects, all of which need to be considered if sustainability is to be guaranteed. On the environmental front, climate change and depletion of natural resources are two factors that are threatening the earth’s ability to regenerate. On the economic front, development that does not pay sufficient attention to income inequality and provision of basic needs to all is a process in danger of imploding. This essay explores the role that finance can play to ensure that investment protects the environment and promotes economic systems that are internally sustainable. Dirk Schoenmaker argues that seeing the role of finance as one of allocating funding to productive investments in a narrow sense is no longer appropriate. What constitutes ‘productive’ cannot be independent of a project’s environmental and socio-economic impact because there are often trade-offs between short-term profits and long-term impact. What might appear to be a profitabl...
Copyright reserved. Subject to the exception provided for by law, no part of this publication may... more Copyright reserved. Subject to the exception provided for by law, no part of this publication may be reproduced and/or published in print, by photocopying, on microfilm or in any other way without the written consent of the copyright holder(s); the same applies to whole or partial adaptations. The publisher retains the sole right to collect from third parties fees payable in respect of copying and/or take legal or other action for this purpose.
The market for green bonds is growing rapidly and has been boosted by the European Commission’s p... more The market for green bonds is growing rapidly and has been boosted by the European Commission’s plan to raise through green bonds 30 percent of the up to €750 billion that will be borrowed under the Next Generation EU coronavirus economic recovery programme. But while green bonds can reduce the financing costs of green projects and technologies, their current design means they fall short of fulfilling their full potential. Issuing green bonds alongside regular bonds fragments bond issues, reducing liquidity and thus increasing financing costs. Moreover, green bond prices reflect liquidity, credit risk and environmental performance jointly, which makes it difficult to isolate the part of the return on the bonds that relates to environmental performance. We propose an alternative: issuance of regular bonds with attached green certificates that ensure earmarking for green purposes. The new design would lead to more liquid securities (as only regular bonds are issued), which would reduc...
textabstractBrexit will lead to a partial migration of financial firms from London to the EU27. T... more textabstractBrexit will lead to a partial migration of financial firms from London to the EU27. This Policy Contribution provides a comparison between London and four major cities that will host most of the new EU27 wholesale market: Frankfurt, Paris, Dublin and Amsterdam. It gives a detailed picture of the wholesale markets, the largest players in these markets and the underlying clearing infrastructure. It also provides data on professional services and innovation.
Both theory (game theory) and practice (recent financial crisis) indicate that national interests... more Both theory (game theory) and practice (recent financial crisis) indicate that national interests prevail in cross-border resolution. National authorities aim for the least-cost solution for domestic tax-payers. This results in an undersupply of the public good of global financial stability. International banks are increasingly run on national lines, as national supervisors force stand-alone subsidiaries to maintain separate liquidity and capital buffers in each jurisdiction. To preserve the Internal Market in Banking, this paper proposes a supranational approach to banking supervision and resolution in Europe. The large cross-border banks would then be supervised directly by the European Banking Authority, and in case of liquidity and solvency problems, have access to the ECB and a newly proposed European Resolution Authority. A European Resolution Authority needs a fiscal backstop and a strong legal framework to be credible. The access to governments funds can be based on ex ante ...
Erratum 6 December 2017 - Table 1, page 3. "Portugal is currently reviewing its supervisory ... more Erratum 6 December 2017 - Table 1, page 3. "Portugal is currently reviewing its supervisory model." The European Union’s financial supervisory architecture is based on a sectoral model with separate authorities for banking, insurance and securities and markets. New developments in the EU financial sector make this sectoral structure increasingly out of date - Brexit creates a need for strong EU-level wholesale market and conduct-of-business supervision to build an integrated capital market for the EU27; Mis-selling of bank bonds – that can be bailed in – to retail consumers has highlighted the need for a strong conduct-of-business supervisor for banking and other retail financial services, separate from prudential supervision to ensure a strong focus on the interests of consumers; Financial conglomerates, combining banking and insurance, make up about a third of Europe’s banking and insurance sector. Joined-up supervision would strengthen the prudential supervision of thes...