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The Rise and Stall of EU Macro‐Prudential Policy. An Empirical Analysis of Policy Conflicts over Financial Stability, Market Integration, and National Discretion

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  • Bart Stellinga

Abstract

The 2007–09 financial crisis appeared to demonstrate the need for a strong, supranational EU macro‐prudential policy framework to prevent similar future disasters. The implemented framework, however, is neither. It is highly complex, involving many constraints on the use of macro‐prudential instruments. It is also one of the principal areas of national discretion in EU banking regulation. To explain this, I build on the ‘financial trilemma’ thesis which holds that there are inherent tensions between pursuing financial stability, financial integration and national financial policies. Supranationalizing macro‐prudential policy proved difficult due to a lack of consensus on how to measure systemic risks and because of the distributional consequences involved. This increased the tension between stability and integration, as national macro‐prudential policies could constrain cross‐border finance and they could be misused for competitiveness considerations. Key policy actors disagreed on which goals to prioritize, with bargaining leading to a convoluted policy framework.

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  • Bart Stellinga, 2021. "The Rise and Stall of EU Macro‐Prudential Policy. An Empirical Analysis of Policy Conflicts over Financial Stability, Market Integration, and National Discretion," Journal of Common Market Studies, Wiley Blackwell, vol. 59(6), pages 1438-1457, November.
    • Handle: RePEc:bla:jcmkts:v:59:y:2021:i:6:p:1438-1457
    DOI: 10.1111/jcms.13195
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    References listed on IDEAS

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    Cited by:

    1. Massimo Arnone & Alberto Costantiello & Angelo Leogrande, 2025. "Analyzing Risk Exposure Determinants in European Banking: A Regulatory Perspective," Working Papers hal-04865226, HAL.
    2. Pierpaolo Benigno & Paolo Canofari & Giovanni Bartolomeo & Marcello Messori, 2024. "The Spectre of Financial Dominance in the Eurozone," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 10(1), pages 59-80, March.
    3. Kouretas, Georgios P. & Papadopoulos, Athanasios P. & Tavlas, George S., 2022. "Financial risks, monetary policy in the QE era, and regulation," Journal of Financial Stability, Elsevier, vol. 63(C).
    4. Matthias Thiemann & Bart Stellinga, 2023. "Between technocracy and politics: How financial stability committees shape precautionary interventions in real estate markets," Regulation & Governance, John Wiley & Sons, vol. 17(2), pages 531-548, April.
    5. repec:osf:osfxxx:2u4jb_v1 is not listed on IDEAS

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