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A European Deposit Insurance and Resolution Fund

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  • Schoenmaker, Dirk
  • Gros, Daniel

Abstract

The eurozone is caught in a ‘diabolical loop’ in which weak domestic banking systems damage sovereign fiscal positions and conversely, in which risky sovereign positions disproportionately threaten domestic banking stability. A European-level banking system could go a long way towards breaking this unfortunate loop and stabilising the eurozone. This would require a European safety net for cross-border banks. This paper sketches the building blocks of a European Deposit Insurance Fund. We calculate that such a Fund would amount to €55 billion for the 35 largest European banks. This Fund could be created over ten years through risk-based deposit insurance premiums levied on the top 35 banks. Once fully up and running, the Fund could also deal with the resolution of one or more of these 35 banks. The Fund would then be turned into a European Deposit Insurance and Resolution Fund. The paper aims to promote debate among policy-makers, industry and academia.

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Bibliographic Info

Paper provided by Centre for European Policy Studies in its series CEPS Papers with number 6918.

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Length: 12 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:eps:cepswp:6918

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References

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  1. Gerhardt, Maria & Lannoo, Karel, 2011. "Options for reforming deposit protection schemes in the EU," ECRI Papers 4339, Centre for European Policy Studies.
  2. Charles Goodhart & Dirk Schoenmaker, 2009. "Fiscal Burden Sharing in Cross-Border Banking Crises," International Journal of Central Banking, International Journal of Central Banking, vol. 5(1), pages 141-165, March.
  3. Maurice Obstfeld, 2011. "International Liquidity: The Fiscal Dimension," NBER Working Papers 17379, National Bureau of Economic Research, Inc.
  4. Rafael Repullo, 2000. "Who should act as lender of last resort? an incomplete contracts model," Proceedings, Federal Reserve Bank of Cleveland, pages 580-610.
  5. de Haan,Jakob & Oosterloo,Sander & Schoenmaker,Dirk, 2012. "Financial Markets and Institutions," Cambridge Books, Cambridge University Press, number 9781107025943.
  6. Benedicta Marzinotto & André Sapir & Guntram B. Wolff, 2011. "What kind of fiscal union?," Policy Briefs 646, Bruegel.
  7. María J. Nieto & Larry D. Wall, 2006. "Preconditions for a successful implementation of supervisors' prompt corrective action: Is there a case for a banking standard in the European Union?," Working Paper 2006-27, Federal Reserve Bank of Atlanta.
  8. Dirk Schoenmaker, 2011. "The Financial Trilemma," Tinbergen Institute Discussion Papers 11-019/2/DSF 7, Tinbergen Institute.
  9. Jean Dermine, 2000. "Bank Mergers in Europe: The Public Policy Issues," Journal of Common Market Studies, Wiley Blackwell, vol. 38(3), pages 409-425, 09.
  10. Hertig Gerard & Lee Ruben & McCahery Joseph A., 2010. "Empowering the ECB to Supervise Banks: A Choice-Based Approach," European Company and Financial Law Review, De Gruyter, vol. 7(2), pages 171-215, January.
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Citations

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Cited by:
  1. Thorsten Beck & Daniel Gros, 2012. "Monetary Policy and Banking Supervision: Coordination Instead of Separation," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 13(4), pages 33-39, December.
  2. Henri Sterdyniak & Maylis Avaro, 2013. "Banking union a solution to the euro zone crisis," Sciences Po publications 2013-20, Sciences Po.
  3. Gros, Daniel, 2013. "Principles of a Two-Tier European Deposit (Re-)Insurance System," CEPS Papers 7958, Centre for European Policy Studies.
  4. Iain Begg, 2012. "Banking Union: Inevitable, But Profoundly Challenging?," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 13(4), pages 15-20, December.
  5. Henrique S. Basso & James Costain, 2013. "Fiscal delegation in a monetary union with decentralized public spending," Banco de Espa�a Working Papers 1311, Banco de Espa�a.
  6. Carmassi, Jacopo & Di Noia, Carmine & Micossi, Stefano, 2012. "Banking Union: A federal model for the European Union with prompt corrective action," CEPS Papers 7308, Centre for European Policy Studies.
  7. Schoenmaker, Dirk & Gros, Daniel, 2012. "A European Deposit Insurance and Resolution Fund - An Update," CEPS Papers 7276, Centre for European Policy Studies.
  8. Marek Dabrowski, 2012. "Fiscal and Monetary Policy Determinants of the Eurozone Crisis and its Resolution," CASE Network Studies and Analyses 443, CASE-Center for Social and Economic Research.
  9. Hans Geeroms & Pawel Karbownik, 2014. "A Monetary Union requires a Banking Union," Bruges European Economic Policy Briefings 33, European Economic Studies Department, College of Europe.
  10. repec:spo:wpecon:info:hdl:2441/f6h8764enu2lskk9p4srjesb4 is not listed on IDEAS
  11. Marcelo Madureira Prates, 2013. "Why Prudential Regulation Will Fail to Prevent Financial Crises. A Legal Approach," Working Papers Series 335, Central Bank of Brazil, Research Department.
  12. Michael Clauss, 2014. "The dynamics of European banking union: the process of its making and its role in future financial and economic integration," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 14(4), pages 68-76, 01.
  13. Zbyněk Revenda, 2013. "Theoretical and Economic Aspects of Deposit Insurance," Politická ekonomie, University of Economics, Prague, vol. 2013(2), pages 149-170.
  14. Gómez-Puig, Marta & Sosvilla-Rivero, Simón, 2013. "Granger-causality in peripheral EMU public debt markets: A dynamic approach," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4627-4649.

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