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An Integrated Financial Framework for the Banking Union: Don’t Forget Macro-Prudential Supervision

Author

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  • Dirk Schoenmaker

Abstract

This essay reviews the sequencing of the functions of supervision, resolution, deposit insurance and the fiscal backstop in the Banking Union. All these functions deal with the soundness of individual banks. In the run-up to the 2007-2009 financial crisis, we overlooked the bigger picture of the stability of the wider financial system. This essay puts forward a concrete proposal for conducting macro-prudential policy in the prospective Banking Union. We suggest giving the lead on applying macro-prudential tools in the Banking Union to the ECB to foster a coherent approach, with important input from the national competent authorities to allow for much needed differentiation at the national level. Next, we argue that the ECB should separate the macro-prudential and micro-prudential functions. Otherwise, we may again be bogged down by the details of individual banks (micro), while losing sight of emerging imbalances in the wider financial system (macro).

Suggested Citation

  • Dirk Schoenmaker, 2013. "An Integrated Financial Framework for the Banking Union: Don’t Forget Macro-Prudential Supervision," European Economy - Economic Papers 2008 - 2015 495, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0495
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    Cited by:

    1. Aerdt Houben & Jan Kakes, 2013. "Financial imbalances and macroprudential policy in a currency union," DNB Occasional Studies 1105, Netherlands Central Bank, Research Department.
    2. Faruk Ülgen, 2021. "Public good, collective action and financial regulation," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 92(1), pages 147-167, March.
    3. Salim Dehmej & Leonardo Gambacorta, 2019. "Macroprudential Policy in a Monetary Union," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(2), pages 195-212, June.
    4. Mariarosaria Comunale & Jeroen Hessel, 2014. "Current account imbalances in the Euro area: Competitiveness or financial cycle?," DNB Working Papers 443, Netherlands Central Bank, Research Department.

    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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