Bruegel published a policy brief titled 'Is Europe Ready for a Major Banking Crisis?' It argues that with the emergence of 'pan-European banks', Europe's arrangements for financial stability have become inadequate. Intra-EU financial regulation has recently progressed at a spectacular pace whilst financial stability arrangements remain based at the national level. In the event of failure of a pan-European bank, voluntary coordination between national authorities would be unlikely to lead to decisions that best serve Europeans’ collective interest.
The Policy Brief proposes a two-tier framework of EU-level and national prudential arrangements and institutions, addressing challenges posed by pan-European banks whislt remaining true to Europe's subsidiarity principle. However, this framework would require engagement at the highest political levels to become reality, due to significant technical and political difficulties. But these difficulties are vastly exceeded by the risks involved in further delay to action in this important area of financial policy.
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© Graham Bishop
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