Theoretical Lessons from EMU and Banking Union: Plus ça change (original) (raw)
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2020
Banking Union represents one of the most important developments in European integration since the launch of Monetary Union. Furthermore, the design of the Banking Union agreed between 2012 and 2014 was a messy compromise among European Union (EU) member states. It is not surprising then that Banking Union has sparked a lively academic debate and triggered an ever-growing number of publications from different disciplinary backgrounds. This edited volume is located at the intersection of two major waves of academic research on Banking Union. The first wave of academic work focuses upon the economic rationale underpinning the supranationalisation of control over banking-regulation, supervision, support and resolution-and the political dynamics and legal issues that shaped the design of the Banking
The Difficult Construction of European Banking Union
2020
Banking Union represents one of the most important developments in European integration since the launch of Monetary Union. Furthermore, the design of the Banking Union agreed between 2012 and 2014 was a messy compromise among European Union (EU) member states. It is not surprising then that Banking Union has sparked a lively academic debate and triggered an ever-growing number of publications from different disciplinary backgrounds. This edited volume is located at the intersection of two major waves of academic research on Banking Union. The first wave of academic work focuses upon the economic rationale underpinning the supranationalisation of control over banking-regulation, supervision, support and resolution-and the political dynamics and legal issues that shaped the design of the Banking
The Establishment of the (European) Banking Union
Palgrave Macmillan studies in banking and financial institutions, 2020
The Establishment of the (European) Banking Union 4.1 The BirTh of The Banking Union as a response To The ongoing fiscal crisis in The eUro area 4.1.1 The Political Decisions of June 2012 and the Commission's Initiatives (1) Amidst the ongoing fiscal crisis in the euro area, which became manifest in 2010, the initiative to create the (European) Banking Union [hereinafter the 'BU', also referred to frequently by this author as well as the 'EBU'] was introduced in the Report submitted on 26 June 2012 by the (then) President of the European Council, Herman Van Rompuy, entitled "Towards a Genuine Economic and Monetary Union" (the so-called Van Rompuy Report). 1 One of the four elements of this report was the creation of "an integrated financial framework". 2 The creation of the BU was tabled immediately afterwards, at the Euro Area Summit of 29 June 2012, which included a phrase summarising the main rationale behind this initiative in its statement: "We affirm that it is imperative to break the vicious circle between 'doom loops') between the banking sector and sovereign bond markets, see Mitchener (2014).
The road towards the establishment of the European Banking Union
Munich Personal RePEc Archive No 62463, 2015
The rising delinquencies in the U.S. subprime mortgage market in 2006 and the succeeding collapse in housing prices had a considerably negative impact on the functioning of the European financial systems and the smooth operation of European economies. Indeed, in the Euro-area, what started as a financial crisis escalated to a twin crisis after being doubled by the eruption of a massive sovereign debt crisis in 2010. The lack of an established set of bank supervision and resolution strategies at the Euro-area level, the vicious circle between banks and European nation-states, the threats for the sustainability of the common currency, and the deterioration of the market conditions were the key factors which lately led to the acceleration of the steps towards the creation of a banking union in Europe. The principal aim of the European Banking Union is to shape the necessary legal and institutional framework and provide the authorities with powers and tools to deal with ailing banks in order to prevent the devastating effects that a future shock may have on the financial system, the real economy, and the society. This paper presents the formal reactions of the sovereigns and the European Central Bank to the twin crisis, and critically discusses the key problems and the inherent weaknesses which led to the establishment of a banking union for the Euro-area member states. The structure of the banking union, the various aspects of its operation, and its future prospects are also presented and discussed.
Journal for Contemporary European Politics, 2014
The Eurozone crisis brought the European Economic and Monetary Union (EMU) to the brink of collapse; the prevention of this required the use of unconventional measures by the European Central Bank (ECB), the construction of new financial regulatory institutions and an amendment of EMU laws. These changes culminated in the establishment of a banking union, though not a complete one. This article has two aims. First, it seeks to evaluate to what extent the European crisis management strategy led to a fundamental change in the EMU institutional design. Second, it seeks to identify the key drivers of change, with a focus on the interaction between ECB, the Commission and Germany.
A banking union for Europe: Making a virtue out of necessity
The Spanish Review of Financial Economics, 2015
Banking union is the most ambitious European project undertaken since the introduction of the single currency. It was launched in the summer of 2012, in order to send the markets a strong signal of unity against a looming financial fragmentation problem that was putting the euro on the ropes. The main goal of banking union is to resume progress towards the single market for financial services and, more broadly, to preserve the single market by restoring the proper functioning of monetary policy in the eurozone through restoring confidence in the European banking sector. This will be achieved through new harmonised banking rules and stronger systems for both banking supervision and resolution, that will be managed at the European level. The EU leaders and co-legislators have been working against the clock to put in place a credible and effective setup in record time, amid intense negotiations (with final deals often closed at the last minute) and very significant concessions by all parties involved (most of which would have been simply unthinkable just a few years ago). Despite the fact that the final setup does not provide for the optimal banking union, we still hold to its extraordinary political value and see its huge potential. By putting Europe back on the right integration path, banking union will restore the momentum towards a genuine economic and monetary union. Nevertheless, in order to put an end to the sovereign/banking loop, further progress in integration is needed including key fiscal, economic and political elements.
Polio or Premeditated Murder: The Curious Case of the Eurozone's Banking Union
In this paper, we put under scrutiny the blueprint of the Eurozone's banking union in trying to confront and contrast the shortcomings of the currency union and malaise of the euro-crisis at hand with the aims, instruments and scope of the banking union itself. After investigating direction of causality between the weak banking sectors and the week sovereign (public) finances, we go on to rectify both the objectives and design of the Eurozone's banking union (EBU). This paper argues that EBU has been deployed to deal with wrong problems equipped with ill-suited tools, which accounts for its early paralysis. However, the fact that leading members of the Eurozone hastily passed national legislation which exempts their strategically important banks from the outreach of the European Banking Authority they themselves have just established, casts doubt that the aforementioned financial polio may disguise something much more sinister coming up. One way or the other, we claim that the EBU stands no chance whatsoever without further " federalisation " of the E(M)U, although its functional survival may be arranged both with and without Germany's continued participation.
International Review of Applied Economics, 2021
This paper presents a chronological survey of the 20 academic papers that Malcolm authored or co-authored between 1997 and 2017 on the flawed design-and hence flawed implementation-of the European Monetary Union (EMU)'s macroeconomic policy pillars. We augment his analyses by pointing out a thirdcomplementarydesign flaw: the EMU's two-tiered structure of financial regulation and oversight. While this financial pillar aimed at reconciling Europe's historically bank-based financial systems with large European banks' entry into global financial competition, it created a combustible mix when combined with the EMU's macroeconomic-policy pillars. The Global Financial Crisis lit the fire: membernations, forced to rescue their domestically-chartered too-big-to-fail megabanks, had to adopt austerity policies that both slowed the pace of post-crisis economic growth and eroded support for pro-Union political leaders. Only marginal changes have been made in these policy pillars post-crisis. Consequently, Europe faces a financial bifurcation point: either to continue 'whatever it takes' support for its megabanks, or to rethink both its financial architecture and its macroeconomic and financial policy pillars.