Euro Area: Single Currency - National Money Creation
The Eurosystem has been pursuing a crisis management policy for more than four years now. This policy aims primarily at maintaining financial stability in the euro area by providing vast liquidity support to commercial banks that are operating in nationally segmented banking systems. As a side effect, the national central banks substitute money market operations for cross-border capital flows. The national central banks are thus increasingly engaging in substantial balance-of-payments financing, and financial risks are being shifted from investors to European taxpayers via the Eurosystem. Symptomatically, this shows up in exploding TARGET2 positions in the national central banks' balance sheets. The longer this process continues, the stronger the centrifugal forces become that ultimately might break up the single currency. Instead of a fiscal union, a euro-area-wide regulatory approach is required. In addition to establishing a uniform scheme for banking regulation, supervision and resolution, we recommend that contingent convertible bonds (CoCos) be introduced to provide a major source of refinancing for the banking industry. Since CoCos cannot be introduced overnight, national and European banking resolution funds would be needed in the short run. These funds would not rescue banks but they would kick in as soon as a bank's equity is depleted in order to wind up failing banks in a systemically prudent way
|Date of creation:||Aug 2012|
|Contact details of provider:|| Postal: Kiellinie 66, D-24105 Kiel|
Phone: +49 431 8814-1
Fax: +49 431 85853
Web page: http://www.ifw-kiel.de
More information through EDIRC
References listed on IDEAS
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.:
- Thomas J. Sargent, 1982.
"The Ends of Four Big Inflations,"
in: Inflation: Causes and Effects, pages 41-98
National Bureau of Economic Research, Inc.
- Buch, Claudia M., 2001.
"Distance and International Banking,"
Kiel Working Papers
1043, Kiel Institute for the World Economy (IfW).
- Koralai Kirabaeva, 2011. "Adverse Selection and Financial Crises," Bank of Canada Review, Bank of Canada, vol. 2010(Winter), pages 11-19.
- Sinn, Hans-Werner & Wollmershäuser, Timo, 2012.
"Target loans, current account balances and capital flows: The ECB’s rescue facility,"
Munich Reprints in Economics
19556, University of Munich, Department of Economics.
- Hans-Werner Sinn & Timo Wollmershäuser, 2012. "Target loans, current account balances and capital flows: the ECB’s rescue facility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(4), pages 468-508, August.
- Hans-Werner Sinn & Timo Wollmershäuser, 2011. "Target Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility," CESifo Working Paper Series 3500, CESifo Group Munich.
- Hans-Werner Sinn & Timo Wollmershaeuser, 2011. "Target Loans, Current Account Balances and Capital Flows: The ECB's Rescue Facility," NBER Working Papers 17626, National Bureau of Economic Research, Inc.
- Lex Hoogduin & Peter Wierts, 2012. "Thoughts on policies and the policy framework after a financial crisis," BIS Papers chapters, in: Bank for International Settlements (ed.), Threat of fiscal dominance?, volume 65, pages 83-93 Bank for International Settlements.
- Simon H. Kwan & Mark J. Flannery & M. Nimalendran, 1999.
"Market evidence on the opaqueness of banking firms' assets,"
Working Papers in Applied Economic Theory
99-11, Federal Reserve Bank of San Francisco.
- Flannery, Mark J. & Kwan, Simon H. & Nimalendran, M., 2004. "Market evidence on the opaqueness of banking firms' assets," Journal of Financial Economics, Elsevier, vol. 71(3), pages 419-460, March.
- Mark J. Flannery & Simon H. Kwan & Mahendrarajah Nimalendran, 1997. "Market evidence on the opaqueness of banking firms' assets," Proceedings 560, Federal Reserve Bank of Chicago.
- Buch, Claudia M, 2003. " Information or Regulation: What Drives the International Activities of Commercial Banks?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 851-69, December.
- Charles Goodhart, 1999. "Myths About the Lender of Last Resort," FMG Special Papers sp120, Financial Markets Group.
- Abad, José M & Loeffler, Axel & Zemanek, Holger, 2011.
"TARGET2 Unlimited: Monetary Policy Implications of Asymmetric Liquidity Management within the Euro Area,"
31937, University Library of Munich, Germany.
- Abad, José M. & Löffler, Axel & Zemanek, Holger, 2011. "TARGET2 Unlimited: Monetary Policy Implications of Asymmetric Liquidity Management within the Euro Area," CEPS Papers 5904, Centre for European Policy Studies.
- Domenico Giannone & Michèle Lenza & Huw Pill & Lucrezia Reichlin, 2012.
"The ECB and the Interbank Market,"
Working Papers ECARES
ECARES 2012-005, ULB -- Universite Libre de Bruxelles.
- Giannone, Domenico & Lenza, Michele & Pill, Huw & Reichlin, Lucrezia, 2012. "The ECB and the Interbank Market," CEPR Discussion Papers 8844, C.E.P.R. Discussion Papers.
- Giannone, Domenico & Lenza, Michele & Reichlin, Lucrezia, 2012. "The ECB and the interbank market," Working Paper Series 1496, European Central Bank.
- Padoa-Schioppa, Tommaso, 1999. "EMU and Banking Supervision," International Finance, Wiley Blackwell, vol. 2(2), pages 295-308, July.
- Buiter, Willem H., 2008. "Can Central Banks Go Broke?," CEPR Discussion Papers 6827, C.E.P.R. Discussion Papers.
- Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2006.
"Zombie Lending and Depressed Restructuring in Japan,"
NBER Working Papers
12129, National Bureau of Economic Research, Inc.
- Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-1977, December.
- Schmitz, Birgit & von Hagen, Jürgen, 2009. "Current Account Imbalances and Financial Integration in the Euro Area," CEPR Discussion Papers 7262, C.E.P.R. Discussion Papers.
- Donald P. Morgan, 2002. "Rating Banks: Risk and Uncertainty in an Opaque Industry," American Economic Review, American Economic Association, vol. 92(4), pages 874-888, September.
- Focarelli, Dario & Pozzolo, Alberto Franco, 2001. "The patterns of cross-border bank mergers and shareholdings in OECD countries," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2305-2337, December.
- Marvin Goodfriend, 2007.
"How the World Achieved Consensus on Monetary Policy,"
Journal of Economic Perspectives,
American Economic Association, vol. 21(4), pages 47-68, Fall.
- Marvin Goodfriend, 2007. "How the World Achieved Consensus on Monetary Policy," NBER Working Papers 13580, National Bureau of Economic Research, Inc.
- Anat R. Admati & Peter M. DeMarzo & Martin F. Hellwig & Paul Pfleiderer, 2010.
"Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Expensive,"
Working Paper Series of the Max Planck Institute for Research on Collective Goods
2010_42, Max Planck Institute for Research on Collective Goods.
- Admati, Anat R. & DeMarzo, Peter M. & Hellwig, Martin F. & Pfleiderer, Paul, 2010. "Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity Is Not Expensive," Research Papers 2065, Stanford University, Graduate School of Business.
- Ulrich Bindseil & Philipp Johann König, 2012. "TARGET2 and the European Sovereign Debt Crisis," Credit and Capital Markets, Credit and Capital Markets, vol. 45(2), pages 135–174-135.
When requesting a correction, please mention this item's handle: RePEc:kie:kieliw:1787. 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: (Dieter Stribny)
If references are entirely missing, you can add them using this form.