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Financial re-regulation at a crossroads: How the European experience strengthens the case for a radical reform built on Minsky's approach

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Author Info

  • Mario Tonveronachi

    ()
    (University of Siena)

  • Elisabetta Montanaro

    ()
    (University of Siena)

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    Abstract

    The current financial and sovereign crisis is pushing European politicians and EU bureaucrats to devise new institutional and policy solutions. However, the new EU institutional framework and stricter regulatory requirements do not introduce significant changes in the laissez-faire nature of the regulatory approach. Our opinion is that the entire re-regulation process does not go to the roots of how financial fragility endogenously accumulates, and how finally it produces a crisis each time starting from the weakest part of the financial system. Analysing the European banking sectors from this perspective, we show how domestic specificities add to the limits due to risk-based regulation and supervision. We then build on Minskys regulatory proposals to present the skeleton of a simple alternative to the existing regulatory approach.

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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/10194/10083
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    Bibliographic Info

    Article provided by Economia civile in its journal PSL Quarterly Review.

    Volume (Year): 65 (2012)
    Issue (Month): 263 ()
    Pages: 335-383

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    Handle: RePEc:psl:pslqrr:2012:41

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    Web page: http://www.economiacivile.it

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    Related research

    Keywords: financial regulation; financial fragility; European banks;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Jan Kregel, 2011. "Will restricting proprietary trading and stricter derivatives regulation make the US financial system more stable?," PSL Quarterly Review, Economia civile, vol. 64(258), pages 227-247.
    2. Hellwig, Martin, 2010. "Capital Regulation after the Crisis: Business as Usual?," Working paper 633, Regulation2point0.
    3. Gros, Daniel, 2012. "Macroeconomic Imbalances in the Euro Area: Symptom or cause of the crisis?," CEPS Papers 6865, Centre for European Policy Studies.
    4. Tobias Adrian & Hyun Song Shin, 2008. "Liquidity and leverage," Staff Reports 328, Federal Reserve Bank of New York.
    5. Jean Pisani-Ferry & André Sapir & Guntram B. Wolff, 2012. "The messy rebuilding of Europe," Policy Briefs 719, Bruegel.
    6. Alessandro Roncaglia, 2012. "Keynesian uncertainty and the shaky foundations of statistical risk assessment models," PSL Quarterly Review, Economia civile, vol. 65(263), pages 437-454.
    7. Hyun Song Shin, 2009. "Reflections on Northern Rock: The Bank Run That Heralded the Global Financial Crisis," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 101-19, Winter.
    8. Dirk Schoenmaker & Charles Goodhart, 2006. "Burden Sharing in a Banking Crisis in Europe," FMG Special Papers sp164, Financial Markets Group.
    9. repec:psl:pslqrr:2010:15 is not listed on IDEAS
    10. Carmassi, Jacopo & Micossi, Stefano, 2012. "Time to Set Banking Regulation Right," CEPS Papers 6734, Centre for European Policy Studies.
    11. Jean Pisani-Ferry & André Sapir & Nicolas Véron & Guntram B. Wolff, 2012. "What kind of European banking union?," Policy Contributions 731, Bruegel.
    12. Robert A. Eisenbeis & George G. Kaufman, 2007. "Cross-border banking: challenges for deposit insurance and financial stability in the European Union," Working Paper 2006-15, Federal Reserve Bank of Atlanta.
    13. Jacopo Carmassi & Stefano Micossi, 2012. "Time to Set Banking Regulation Right," FMG Special Papers sp206, Financial Markets Group.
    14. Julian T. S. Chow & Jay Surti, 2011. "Making Banks Safer: Can Volcker and Vickers Do It?," IMF Working Papers 11/236, International Monetary Fund.
    15. Mario Tonveronachi & Elisabetta Montanaro, 2009. "Some preliminary proposals for re-regulating financial systems," Department of Economics University of Siena 553, Department of Economics, University of Siena.
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    Citations

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    Cited by:
    1. Alessandro Roncaglia, 2013. "Il ruolo delle istituzioni nellÕeconomia: introduzione," Moneta e Credito, Economia civile, vol. 66(261), pages 1-4.
    2. Mario Tonveronachi, 2013. "L'Unione Bancaria Europea. Di nuovo un disegno istituzionale incompleto (The European banking union. An incomplete institutional design, again)," Moneta e Credito, Economia civile, vol. 66(264), pages 397-413.
    3. Alessandro Roncaglia, 2013. "Introduction," PSL Quarterly Review, Economia civile, vol. 66(267), pages 369-370.
    4. Alessandro Roncaglia, 2013. "Hyman Minsky's monetary production economy," PSL Quarterly Review, Economia civile, vol. 66(265), pages 77-94.
    5. Mario Tonveronachi, 2013. "De-globalising bank regulation," PSL Quarterly Review, Economia civile, vol. 66(267), pages 371-385.

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