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2016 | OriginalPaper | Buchkapitel

12. Regulatory Reforms in the European Banking Sector

verfasst von : Elena Carletti, Agnese Leonello

Erschienen in: The Palgrave Handbook of European Banking

Verlag: Palgrave Macmillan UK

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Abstract

This chapter discusses the main regulatory reforms impacting European banks, like capital and liquidity regulation, activies restrictions, as well as the changes associated with the establishment of the Banking Union (i.e., the Single Superviosty Mechanism and the Single Resolution Mechanism). For each new regulatory tool, the chapter highlights the market failure that the reform is meant to address and identifies challenges and open issues related to its design and implementation.

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Vorheriges Kapitel European Bank Efficiency and Performance: The Effects of Supranational Versus National Bank Supervision

Nächstes Kapitel Complexity in Regulation

The most extreme example in terms of the negative impact of the emergency actions taken to rescue the banking system on the stability of the sovereign is Ireland. Starting in the autumn of 2008, the Irish government implemented major measures to support the banking sector, such as blanket guarantees for all the liabilities of the six major banks, as well as additional measures in the form of recapitalization and the purchase of toxic assets and rescue intervention. All these measures contributed significantly to a deterioration in Irish public finance.

While the Single Supervisory Mechanism and the Single Resolution Mechanism are already in place and well defined, the third pillar of the Banking Union—the creation of a pan-European deposit insurance scheme—is still under discussion at the time of writing.

The global game literature dates back to Carlsson and van Damme (1993), who show the possibility of deriving a unique equilibrium in contexts characterized by strategic complementarity when agents have noisy information. Since then, global games have been widely used in finance to study, among others, currency crises (Morris and Shin 1998), issues of contagion (Goldstein and Pauzner 2004), the effect of large traders on the occurrence of currency crises (Corsetti et al. 2004), twin crises (Goldstein 2005) and central bank lending (Rochet and Vives 2004).

Cash-in-the-market pricing refers to the dependence of asset prices on the amount of liquidity available in the market. When liquidity in the market is scarce relative to the amount of assets on sale, asset prices do not any longer reflect the fundamental value of the assets, but they are determined by demand and supply of liqudiity, that is by the amount of liquidity held by market participants in aggregate.

See “Literature Review on the integration of regulatory capital and liquidity instruments”(2016) by the Basel Committee on Banking Supervision for a complete survey of the general equilibrium models analysing macroeconomic implications of capital requirements.

For a broader discussion about the Banking Union, the rationale behind it, its architecture and solved and unsolved issues, refer to Chap. 17 by D. Schoenmaker.

See the document “Proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 806/2014 in order to establish a European Deposit Insurance Scheme” at https://ec.europa.eu/transparency/regdoc/rep/1/2015/EN/1-2015-586-EN-F1-1.PDF.

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Titel: Regulatory Reforms in the European Banking Sector
verfasst von: Elena Carletti
Agnese Leonello
Verlag: Palgrave Macmillan UK
Buch: The Palgrave Handbook of European Banking
Print ISBN: 978-1-137-52143-9

Electronic ISBN: 978-1-137-52144-6

Copyright-Jahr: 2016
DOI: https://doi.org/10.1057/978-1-137-52144-6_12