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Efficiency Gains of a European Banking Union

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Author Info

  • Dirk Schoenmaker

    (Duisenberg School of Finance)

  • Arjen Siegmann

    (VU University Amsterdam)

Abstract

An anticipated benefit of the prospective European Banking Union is stronger supervision of European banks. Another benefit would be enhanced resolution of banks in distress. While national governments confine themselves to the domestic effects of a banking failure, a European Resolution Authority would follow a supranational approach, under which domestic and cross-border effects within Europe are incorporated. Using a model of recapitalising banks, this paper develops indicators to measure the efficiency improvement of resolution. Next, these efficiency indicators are applied to the hypothetical resolution of the top 25 European banks, which count for the vast majority of cross-border banking in Europe. Our cost-benefit analysis indicates that the UK, Spain, Sweden, and the Netherlands are the main beneficiaries and thus have the largest economic incentives to join Europe’s Banking Union.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 13-026/IV/DSF51.

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Date of creation: 11 Feb 2013
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Handle: RePEc:dgr:uvatin:20130026

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Web page: http://www.tinbergen.nl

Related research

Keywords: Financial Stability; Financial Crises; Public Good; International Banking;

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