Towards Deeper Financial Integration in Europe: What the Banking Union Can Contribute
AbstractThe agreement to establish a Single Supervisory Mechanism in Europe is a major step towards a Banking Union, consisting of centralized powers for the supervision of banks, the restructuring and resolution of distressed banks, and a common deposit insurance system. In this paper, we argue that the Banking Union is a necessary complement to the common currency and the Internal Market for capital. However, due care needs to be taken that steps towards a Banking Union are taken in the right sequence and that liability and control remain at the same level throughout. The following elements are important. First, establishing a Single Supervisory Mechanism under the roof of the ECB and within the framework of the current EU treaties does not ensure a sufficient degree of independence of supervision and monetary policy. Second, a European institution for the restructuring and resolution of banks should be established and equipped with sufficient powers. Third, a fiscal backstop for bank restructuring is needed. The ESM can play a role but additional fiscal burden sharing agreements are needed. Direct recapitalization of banks through the ESM should not be possible until legacy assets on banks’ balance sheets have been cleaned up. Fourth, introducing European-wide deposit insurance in the current situation would entail the mutualisation of legacy assets, thus contributing to moral hazard.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 13.
Date of creation: Oct 2013
Date of revision:
banking union; Europe; single supervisory mechanism; risk sharing;
Other versions of this item:
- Buch, Claudia M. & Körner, Tobias & Weigert, Benjamin, 2013. "Towards deeper financial integration in Europe: What the Banking Union can contribute," Working Papers 02/2013, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
- E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-16 (All new papers)
- NEP-BAN-2013-11-16 (Banking)
- NEP-CBA-2013-11-16 (Central Banking)
- NEP-EEC-2013-11-16 (European Economics)
- NEP-MAC-2013-11-16 (Macroeconomics)
- NEP-MON-2013-11-16 (Monetary Economics)
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.:
- Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2006.
"Growth volatility and financial liberalization,"
Journal of International Money and Finance,
Elsevier, vol. 25(3), pages 370-403, April.
- Buch, Claudia M. & Eickmeier, Sandra & Prieto, Esteban, 2010.
"Macroeconomic factors and micro-level bank risk,"
Discussion Paper Series 1: Economic Studies
2010,20, Deutsche Bundesbank, Research Centre.
- Claudia M. Buch & Sandra Eickmeier & Esteban Prieto, 2014. "Macroeconomic Factors and Microlevel Bank Behavior," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(4), pages 715-751, 06.
- Buch, Claudia M. & Koch, Cathérine T. & Koetter, Michael, 2011. "Size, productivity, and international banking," Journal of International Economics, Elsevier, vol. 85(2), pages 329-334.
- Mathias Hoffmann & Iryna Shcherbakova-Stewen, 2011.
"Consumption Risk Sharing over the Business Cycle: The Role of Small Firms' Access to Credit Markets,"
The Review of Economics and Statistics,
MIT Press, vol. 93(4), pages 1403-1416, November.
- Mathias Hoffmann & Iryna Shcherbakova, 2009. "Consumption Risk Sharing over the Business Cycle: the Role of Small Firms' Access to Credit Markets," CESifo Working Paper Series 2544, CESifo Group Munich.
- Mathias Hoffmann & Iryna Shcherbakova, 2008. "Consumption risk sharing over the business cycle: the role of small firms' access to credit markets," IEW - Working Papers 363, Institute for Empirical Research in Economics - University of Zurich.
- Jin-Chuan Duan, 2000. "Correction: Maximum Likelihood Estimation Using Price Data of the Derivative Contract (Mathematical Finance 1994, 4/2, 155-167)," Mathematical Finance, Wiley Blackwell, vol. 10(4), pages 461-462.
- Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007.
"The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970-2004,"
Journal of International Economics,
Elsevier, vol. 73(2), pages 223-250, November.
- Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004," CEPR Discussion Papers 5644, C.E.P.R. Discussion Papers.
- Philip R. Lane & Gian Maria Milesi-Ferretti, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities,1970–2004," The Institute for International Integration Studies Discussion Paper Series iiisdp126, IIIS.
- Kenneth Spong, 2000.
"Banking regulation : its purposes, implementation, and effects,"
Federal Reserve Bank of Kansas City, number 2000bria, December.
- Kenneth Spong, 1994. "Banking regulation : its purpose, implementation, and effects," Monograph, Federal Reserve Bank of Kansas City, number 1994bria, December.
- Brewer, Elijah, III & Mondschean, Thomas H, 1994. "An Empirical Test of the Incentive Effects of Deposit Insurance: The Case of Junk Bonds at Savings and Loan Associations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 146-64, February.
- DeLong, Gayle & Saunders, Anthony, 2011. "Did the introduction of fixed-rate federal deposit insurance increase long-term bank risk-taking?," Journal of Financial Stability, Elsevier, vol. 7(1), pages 19-25, January.
- Sebnem Kalemli-Ozcan & Bent E. Sorensen & Oved Yosha, 2004.
"Asymmetric Shocks and Risk Sharing in a Monetary Union: Updated Evidence and Policy Implications for Europe,"
2004-05, Department of Economics, University of Houston.
- Kalemli-Ozcan, Sebnem & Sorensen, Bent E & Yosha, Oved, 2004. "Asymmetric Shocks and Risk Sharing in a Monetary Union: Updated Evidence and Policy Implications for Europe," CEPR Discussion Papers 4463, C.E.P.R. Discussion Papers.
- Luc Laeven, 2002. "Bank Risk and Deposit Insurance," World Bank Economic Review, World Bank Group, vol. 16(1), pages 109-137, June.
- Douglas W. Diamond & Philip H. Dybvig, 2000.
"Bank runs, deposit insurance, and liquidity,"
Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
- Anat Admati & Martin Hellwig, 2013. "The Bankers' New Clothes: What's Wrong with Banking and What to Do about It," Economics Books, Princeton University Press, edition 1, volume 1, number 9929.
- Asdrubali, Pierfederico & Sorensen, Bent E & Yosha, Oved, 1996. "Channels of Interstate Risk Sharing: United States 1963-1990," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1081-1110, November.
- George A. Akerlof & Paul M. Romer, 1993. "Looting: The Economic Underworld of Bankruptcy for Profit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 1-74.
- C. Goodhart & D. Lee, 2013. "Adjustment Mechanisms in a Currency Area," Open Economies Review, Springer, vol. 24(4), pages 627-656, September.
- Hasan Doluca & Malte Hübner & Dominik Rumpf & Benjamin Weigert, 2012. "The European Redemption Pact: Implementation and macroeconomic effects," Intereconomics: Review of European Economic Policy, Springer, vol. 47(4), pages 230-239, July.
- 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.
- George J. Benston & George G. Kaufman, 1997. "FDICIA after Five Years," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 139-158, Summer.
- Rose, Andrew K & Wieladek, Tomasz, 2011.
"Financial Protectionism: the First Tests,"
CEPR Discussion Papers
8404, C.E.P.R. Discussion Papers.
- Andrew K. Rose & Tomasz Wieladek, 2011. "Financial Protectionism: the First Tests," NBER Working Papers 17073, National Bureau of Economic Research, Inc.
- Rose, Andrew & Wieladek, Tomasz, 2011. "Financial protectionism: the first tests," Discussion Papers 32, Monetary Policy Committee Unit, Bank of England.
- George J. Benston & George G. Kaufman, 1997. "FDICIA after five years: a review and evaluation," Working Paper Series, Issues in Financial Regulation WP-97-01, Federal Reserve Bank of Chicago.
- Jin-Chuan Duan, 1994. "Maximum Likelihood Estimation Using Price Data Of The Derivative Contract," Mathematical Finance, Wiley Blackwell, vol. 4(2), pages 155-167.
- Projektgruppe Gemeinschaftsdiagnose, 2013. "Gemeinschaftsdiagnose Herbst 2013," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 80(43), pages 3-77.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hubert Gabrisch).
If references are entirely missing, you can add them using this form.