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Banking crisis management in the EU: an early assessment

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  • Pisani-Ferry, Jean
  • Sapir, André

Abstract

For well over a decade many observers had warned that the European Union was ill-prepared in case of a financial storm because its market integration far outpaced its policy integration. This situation was well known to policy-makers but it was hoped that financial crises would wait until policy integration occurred. The reality turned out differently, however. We assess the management of the 2007--2009 banking crisis within the EU against this backdrop. In a nutshell, we find that Europe has done better than could have been expected on the basis of existing arrangements. The two federal institutions acted swiftly, the European Central Bank by providing ample liquidity and the European Commission by enforcing competition discipline flexibly. However, there was no institutional innovation in the form of an EU-financed bail-out of transnational financial institutions or a genuine EU financial stress test. Supervisory responsibilities remained entirely with individual countries and coordination problems were managed through a combination of ad-hoc, discretionary cooperation and reliance on EU rules and procedures. It is not possible, however, to determine whether this relatively satisfactory situation is due to the fact that ad-hoc coordination was fundamentally sufficient or because no complex case of cross-border bank failure occurred.

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/12379.

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Date of creation: Apr 2010
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Publication status: Published in Economic Policy, 2010, Vol. 25, no. 62. pp. 341-373.Length: 32 pages
Handle: RePEc:dau:papers:123456789/12379

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Related research

Keywords: Bank failures; Bank management; Financial crises; Banking industry; Financial institutions; Management; AD hoc organizations; Economic aspects; 2007-2009 banking crisis;

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Cited by:
  1. Philip Lane, 2013. "Financial Globalisation and the Crisis," Open Economies Review, Springer, Springer, vol. 24(3), pages 555-580, July.
  2. Julian Llorent, Maria del Carmen Melgar, Jose Antonio Ordaz, Flor María Guerrero, 2013. "Stress Tests and Liquidity Crisis in the Banking System," Equilibrium, Uniwersytet Mikolaja Kopernika, vol. 8, pages 31-43.
  3. van der Cruijsen, Carin & de Haan, Jakob & Jansen, David-Jan & Mosch, Robert, 2013. "Knowledge and opinions about banking supervision: Evidence from a survey of Dutch households," Journal of Financial Stability, Elsevier, Elsevier, vol. 9(2), pages 219-229.
  4. Zdenek Kudrna, 2010. "Cross-border resolution of failed banks in the EU: A search for the second-best policies," Working Papers of the Vienna Institute for European integration research (EIF), Institute for European integration research (EIF) 8, Institute for European integration research (EIF).
  5. Pistor Katharina, 2012. "Governing Interdependent Financial Systems: Lessons from the Vienna Initiative," Journal of Globalization and Development, De Gruyter, De Gruyter, vol. 2(2), pages 1-25, January.

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