IDEAS home Printed from
   My bibliography  Save this paper

The Transatlantic Banking Crisis: Lessons and EU Reforms


  • Welfens, Paul J. J.

    () (University of Wuppertal)


The key dynamics of the transatlantic banking crisis are analyzed – with emphasis on the fact that the banking disaster of 2007/08 was not really a surprise –, and the five key requirements for restoring stability and efficiency in the EU/OECD banking sector are highlighted. Most important, however, is the introduction of a new tax regime designed to encourage bankers to take a more long term time horizon in decision-making and to reduce excessive risk-taking. Banks and funds should be taxed not only on the basis of profits but also on the basis of the variability – read variance – of the rate of return on equity: the higher the variability over time the higher the tax to be paid. The quality and comprehensiveness of banks’ balance sheets must be radically improved and all off-balance sheet activities must be included in future total balance sheets. The medium term structure of employment in terms of the breakdown nontradables/tradables will have to adjust.

Suggested Citation

  • Welfens, Paul J. J., 2009. "The Transatlantic Banking Crisis: Lessons and EU Reforms," IZA Policy Papers 2, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izapps:pp2

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Holger Wolf, 2008. "Rethinking banking supervision in the EU," International Economics and Economic Policy, Springer, vol. 4(4), pages 357-361, February.
    2. Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
    3. Joe Peek & James A. Wilcox, 2006. "Housing, Credit Constraints, and Macro Stability: The Secondary Mortgage Market and Reduced Cyclicality of Residential Investment," American Economic Review, American Economic Association, vol. 96(2), pages 135-140, May.
    4. De Bandt, Olivier & Hartmann, Philipp, 2000. "Systemic risk: A survey," Working Paper Series 0035, European Central Bank.
    5. Kenneth A. Froot & Jeremy C. Stein, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1191-1217.
    6. C.A.E. Goodhart, 2008. "The background to the 2007 financial crisis," International Economics and Economic Policy, Springer, vol. 4(4), pages 331-346, February.
    7. Paul Welfens, 2008. "Banking crisis and prudential supervision: a European perspective," International Economics and Economic Policy, Springer, vol. 4(4), pages 347-356, February.
    8. Jungmittag Andre & Untiedt Gerhard, 2002. "Kapitalmobilität in Europa aus empirischer Sicht. Befunde und wirtschaftspolitische Implikationen / Capital Mobility in Europe from an Empirical Viewpoint. Evidence and Implications for Economic Polic," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 222(1), pages 42-63, February.
    9. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    10. Andy Mullineux, 2008. "British banking regulation and supervision: between a rock and a hard place," International Economics and Economic Policy, Springer, vol. 4(4), pages 363-370, February.
    Full references (including those not matched with items on IDEAS)

    More about this item


    banking; financial market reforms; EU; globalization; USA;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F01 - International Economics - - General - - - Global Outlook
    • F30 - International Economics - - International Finance - - - General
    • G01 - Financial Economics - - General - - - Financial Crises

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izapps:pp2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.