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How to Form a More Perfect European Banking Union

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  • Angel Ubide

    () (Peterson Institute for International Economics)

Abstract

The evolving plan for a European banking union falls short of the ideal of an "ever closer union." In fact, the plan's focus on national resolution authorities and funds for insolvent financial institutions, a minimal euro area financing backstop, and costs imposed on creditors of failed banks, could lead to a looser, weaker, and more fragmented banking system. Some aspects of the plan of European leaders will improve the system's soundness, but other aspects could dampen lending in the near term and reduce economic growth. Ubide urges policymakers to focus on making the banking union stronger and more coherent. Troubled banks supervised by the European Central Bank should be covered by a European resolution authority and a European resolution fund to oversee bankruptcy, restructuring, and other reforms. To produce a more united, solid, and stable euro area, the European plan has to lower national barriers to banking, not raise them.

Suggested Citation

  • Angel Ubide, 2013. "How to Form a More Perfect European Banking Union," Policy Briefs PB13-23, Peterson Institute for International Economics.
  • Handle: RePEc:iie:pbrief:pb13-23
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    References listed on IDEAS

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    1. Gary Gorton & Stefan Lewellen & Andrew Metrick, 2012. "The Safe-Asset Share," American Economic Review, American Economic Association, vol. 102(3), pages 101-106, May.
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    Cited by:

    1. Jorg Bibow, 2015. "Making the Euro Viable: The Euro Treasury Plan," Economics Working Paper Archive wp_842, Levy Economics Institute.
    2. repec:ilo:ilowps:488129 is not listed on IDEAS
    3. Simona Elena IAGAR, 2015. "Implications Of Banking Supervision Across The European Monetary Union, A Sovereign Debt Crisis Update," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 7(2a), pages 479-488, September.
    4. Vasile COCRIS & Igor TURCANU & Stanislav PERCIC, 2014. "Towards A European Banking Union: Risks And Challenges," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 14, pages 219-227, December.
    5. Saraceno, Francesco., 2015. "Challenges for the ECB in times of deflation," ILO Working Papers 994881293402676, International Labour Organization.
    6. Jörg Bibow, 2015. "The euro's savior? Assessing the ECB's crisis management performance and potential for crisis resolution," IMK Studies 42-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    7. Jorg Bibow, 2015. "The Euro's Savior? Assessing the ECB's Crisis Management Performance and Potential for Crisis Resolution," Economics Working Paper Archive wp_845, Levy Economics Institute.
    8. Francesco Saraceno, 2016. "The ECB: a reluctant leading character of the EMU play," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 129-151, August.

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