1) Prior to the crisis, EU financial integration increased, especially in interbank markets. However, retail banking remains fragmented along national lines. The crisis reversed integration in interbank markets, increasing financial fragmentation.
2) The document proposes three reforms: 1) thorough bank asset reviews and recapitalization from private sources, 2) restructuring non-viable banks through cross-border mergers, 3) developing corporate bond and equity markets to absorb shocks and reduce reliance on banks.
3) Timing is key - banking sector problems must be addressed first to support the economy, but decisions could shape future stability if not accompanied by cross-border integration and capital market reforms.
POSITION PAPER: Euro Zone Crisis. Diagnosis and Likely Solutions (ESADEgeo)ESADE
Author: Fernando Ballabriga
ESADEgeo - February 2014
Southern euro countries are in a situation of vulnerability due to three factors: their high debt levels, their eroded competitiveness and their difficulties to restart growth. Together, these factors generate a vicious circle which is difficult to exit and which can even degenerate into a self-fulfilling economic downward spiral. This policy brief provides a short guiding tour to the euro zone crisis. It looks at the current situation, the full context conditioning the solutions to the situation, how we got here, and the possible way out. The latter section outlines a set of minimum steps required to make the euro sustainable.
The arguments for fiscal as well as monetary rules in a monetary union aiming at low inflation, the main weaknesses in the Stability and Growth Pact, and proposals for its reform are reviewed. Our own proposal for reforming the SGP is put forward: a requirement for eurozone Member States to enact entrenched legislation which would forbid budgets that led to public debt exceeding a certain proportion of GDP. Countries which failed to enact such provisions or which rescinded them could not remain in the eurozone. This would solve the key “enforcibility problem” that the SGP faces, without centralizing fiscal power in the European Commission. However, effective reform proposals are unlikely to be politically acceptable, and the SGP is likely to continue to be a dead letter. This suggests that the EMU was implemented prematurely.
Authored by: Jacek Rostowski
Published in 2004
La gran banca europea pone a punto sus balancesPwC España
Desde el inicio de la crisis, la gran banca europea ha reducido su tamaño –sólo entre 2012 y 2013 sus activos cayeron un 11%-, ha mejorado sus ratios de capital y ha rebajado sensiblemente su exposición al riesgo. Además, ha ampliado su número de depósitos un 14,5% y ha aumentado su liquidez un 78%. Sin embargo, todavía sigue pendiente de ajustarse a nuevas exigencias regulatorias.
NORMAT E INTERESIT / INTEREST RATES IMPACT AND LOAN SYSTEM IN THE ECONOMIC DE...Shkumbin Gërguri
Commercial banks are intermediators of the interaction between business entities and other economic, legal and social agents. Today, banks do not have the approach towards the classic model, whose function was only to offer classic services of deposits and loans,; with evolution of global trends and technology banks have created nowadays a modern system of operating that applies techniques and methods that are the trend of globalization.
Financial instruments statistics important for central banks, and especially for the National Bank of Poland because if the statistical system imposes a responsibility on the central bank it must meet all the requirements of statistical excellence. This is a very important argument, but only a formal one for our interest in this subject. There is a second stream of motives for addressing this problem in central banks. Experience gained over the last decade shows clearly that financial instruments, especially those issued by enterprises, are becoming increasingly important for monetary transmission mechanisms and for financial stability. Among other things, there is empirical evidence that corporate bond spreads lead real economic activity. The situation in the financial instruments market is also meaningful for the general condition of the credit market, as bonds are close substitutes for banking credit. Development of the financial instruments market also contributes to the so-called financial market deepening effect, with multiple consequences for transmission mechanisms.7 It should be noted that, owing to the wide variety of channels through which financial instruments can interfere with monetary policy operations, the central banks are interested in collecting detailed information on these instruments. In practice it results in a complexity of standards for financial instruments security statistics that central banks are expected to meet.
POSITION PAPER: Euro Zone Crisis. Diagnosis and Likely Solutions (ESADEgeo)ESADE
Author: Fernando Ballabriga
ESADEgeo - February 2014
Southern euro countries are in a situation of vulnerability due to three factors: their high debt levels, their eroded competitiveness and their difficulties to restart growth. Together, these factors generate a vicious circle which is difficult to exit and which can even degenerate into a self-fulfilling economic downward spiral. This policy brief provides a short guiding tour to the euro zone crisis. It looks at the current situation, the full context conditioning the solutions to the situation, how we got here, and the possible way out. The latter section outlines a set of minimum steps required to make the euro sustainable.
The arguments for fiscal as well as monetary rules in a monetary union aiming at low inflation, the main weaknesses in the Stability and Growth Pact, and proposals for its reform are reviewed. Our own proposal for reforming the SGP is put forward: a requirement for eurozone Member States to enact entrenched legislation which would forbid budgets that led to public debt exceeding a certain proportion of GDP. Countries which failed to enact such provisions or which rescinded them could not remain in the eurozone. This would solve the key “enforcibility problem” that the SGP faces, without centralizing fiscal power in the European Commission. However, effective reform proposals are unlikely to be politically acceptable, and the SGP is likely to continue to be a dead letter. This suggests that the EMU was implemented prematurely.
Authored by: Jacek Rostowski
Published in 2004
La gran banca europea pone a punto sus balancesPwC España
Desde el inicio de la crisis, la gran banca europea ha reducido su tamaño –sólo entre 2012 y 2013 sus activos cayeron un 11%-, ha mejorado sus ratios de capital y ha rebajado sensiblemente su exposición al riesgo. Además, ha ampliado su número de depósitos un 14,5% y ha aumentado su liquidez un 78%. Sin embargo, todavía sigue pendiente de ajustarse a nuevas exigencias regulatorias.
NORMAT E INTERESIT / INTEREST RATES IMPACT AND LOAN SYSTEM IN THE ECONOMIC DE...Shkumbin Gërguri
Commercial banks are intermediators of the interaction between business entities and other economic, legal and social agents. Today, banks do not have the approach towards the classic model, whose function was only to offer classic services of deposits and loans,; with evolution of global trends and technology banks have created nowadays a modern system of operating that applies techniques and methods that are the trend of globalization.
Financial instruments statistics important for central banks, and especially for the National Bank of Poland because if the statistical system imposes a responsibility on the central bank it must meet all the requirements of statistical excellence. This is a very important argument, but only a formal one for our interest in this subject. There is a second stream of motives for addressing this problem in central banks. Experience gained over the last decade shows clearly that financial instruments, especially those issued by enterprises, are becoming increasingly important for monetary transmission mechanisms and for financial stability. Among other things, there is empirical evidence that corporate bond spreads lead real economic activity. The situation in the financial instruments market is also meaningful for the general condition of the credit market, as bonds are close substitutes for banking credit. Development of the financial instruments market also contributes to the so-called financial market deepening effect, with multiple consequences for transmission mechanisms.7 It should be noted that, owing to the wide variety of channels through which financial instruments can interfere with monetary policy operations, the central banks are interested in collecting detailed information on these instruments. In practice it results in a complexity of standards for financial instruments security statistics that central banks are expected to meet.
This paper is concentrated on the comparative macroeconomic analysis of the differences stemming from the extent to which the institutional framework of the currency board arrangement is implemented in the legal and regulatory systems in the different countries.
The main objective of taking into consideration and examining the currency board institutional arrangements is to distinguish between the impact that currency board countries and countries with pegged exchange rate have on different macroeconomic indicators. During the analysis of these two extreme representatives of the fixed exchange rate mechanism, a third group of countries naturally emerges, which consists of countries acting like currency boards but without official, legal implementation of this arrangement. Once the distinction among all 22 countries taken into consideration had been made, the main scope of the analysis concentrates on the econometric estimation of the currency boards' effects over inflation, nominal and real interest rates and economic growth in countries under currency board and all other pegged exchange rate economies.
Authored by: Lubomira Anastassova
Published in 2000
Conference: The New Financial Architecture in the Eurozone - Pierre Werner Chair, Robert Schuman Centre for Advanced Studies, European University Institute
By: Carmelo Salleo, ECB
The Greek 2011 budget failed miserably despite austerity measure; the eurozone continues stubbornly to plug an unpluggable hole since the roots of the problem are not adressed. The worst is to come...
‘European financial centres will survive the crisis’ – OPENSALON Jake Fury
European-financial-centres-will-survive-the-crisis%E2%80%99# The Summit on the Global Agenda is the world’s largest brainstorming meeting attened by thought leaders of the World Economic Forum’s Network of Global Agenda Councils.
This paper is concentrated on the comparative macroeconomic analysis of the differences stemming from the extent to which the institutional framework of the currency board arrangement is implemented in the legal and regulatory systems in the different countries.
The main objective of taking into consideration and examining the currency board institutional arrangements is to distinguish between the impact that currency board countries and countries with pegged exchange rate have on different macroeconomic indicators. During the analysis of these two extreme representatives of the fixed exchange rate mechanism, a third group of countries naturally emerges, which consists of countries acting like currency boards but without official, legal implementation of this arrangement. Once the distinction among all 22 countries taken into consideration had been made, the main scope of the analysis concentrates on the econometric estimation of the currency boards' effects over inflation, nominal and real interest rates and economic growth in countries under currency board and all other pegged exchange rate economies.
Authored by: Lubomira Anastassova
Published in 2000
Conference: The New Financial Architecture in the Eurozone - Pierre Werner Chair, Robert Schuman Centre for Advanced Studies, European University Institute
By: Carmelo Salleo, ECB
The Greek 2011 budget failed miserably despite austerity measure; the eurozone continues stubbornly to plug an unpluggable hole since the roots of the problem are not adressed. The worst is to come...
‘European financial centres will survive the crisis’ – OPENSALON Jake Fury
European-financial-centres-will-survive-the-crisis%E2%80%99# The Summit on the Global Agenda is the world’s largest brainstorming meeting attened by thought leaders of the World Economic Forum’s Network of Global Agenda Councils.
Fiduciary or paper money is issued by the Central Bank on the basis of
computation of estimated demand for cash. Monetary policy guides the Central
Bank’s supply of money in order to achieve the objectives of price stability (or low
inflation rate), full employment, and growth in aggregate income.
This paper focuses on roots of strain in the European Monetary Union (EMU). It argues that there is need for a thorough reform of the governance structure of the Union in conjunction with radical changes in the regulation and supervision of financial markets. Financial intermediation has gone astray in recent decades and entailed a big bubble in the industrialized world. Waves of financial deregulation have enhanced systemic risks, via speculative behavior and growing inter-connectedness. Moreover, the EMU was sub-optimal from its debut and competitiveness gaps did not diminish against the backdrop of its inadequate policy and institutional design. The euro zone crisis is not related to fiscal negligence only; over-borrowing by the private sector and poor lending by banks, as well as a one-sided monetary policy, also explain this debacle. The EMU needs to complement its common monetary policy with solid fiscal/budget underpinnings. Fiscal rules and sanctions are necessary, but not sufficient. A common treasury (a federal budget) is needed in order to help the EMU absorb shocks and forestall confidence crises. A joint system of regulation and supervision of financial markets should operate. Emergency measures have to be comprehensive and acknowledge the necessity of a lender of last resort; they have to combat vicious circles. Structural reforms and EMU level policies are needed to enhance competitiveness in various countries and foster convergence. The EU has to work closely with the US and other G20 members in order to achieve a less unstable global financial system.
Authored by: Daniel Daianu
Published in 2012
Unlike the crisis years of 2007-2009 (when the insolvency of large banks was a major problem), the current round of the global financial crisis has fiscal origins. Almost all developed countries suffer from an excessive public debt burden that has been built up over the last two decades or more. The financial crisis caused a further deterioration of government accounts as a result of ill-tailored countercyclical fiscal response and, in some cases, a costly financial sector rescue. All excessively indebted countries must conduct fiscal adjustment, even if this involves economic and political costs in terms of lower output and higher unemployment. Central banks can reduce these costs through accommodative monetary policies but without compromising their anti-inflationary missions and institutional independence. The ECB is additionally constrained by its institutional status which is based on a delicate cross-country political consensus. Excessive ECB involvement in quasi-fiscal rescue operations can undermine this consensus and lead to a disintegration of the Eurozone. There are also strong arguments in favor of strengthening fiscal and banking integration within the EU, especially the fiscal discipline mechanism at national levels, and building the EU rescue capacity in respect to sovereigns and banks based on strong policy conditionality.
Authored by: Marek Dabrowski
Published in 2012
The paper first considers why central European countries wish to join EMU soon. The main reasons are the risk of macroeconomic instability they face outside the euro zone if they wish to grow quickly. At the same time, Central Europe is highly integrated as regards trade with EMU, so it is little exposed to asymmetric shocks that would require a realignment of exchange rates. Finally, it is argued that there is no cost in terms of slower growth from EMU accession, so that there is no trade-off, as has been claimed, between nominal convergence to EMU and real convergence to EU average GDP levels. Second, the paper assesses whether Central European accession to EMU would be disadvantageous to current members. It concludes that accession cannot increase inflationary pressure on existing EMU members, as has been claimed, but that slow growing members of EMU might suffer increased unemployment, unless they increase the flexibility of their labour markets. Incumbent members may also be unwilling to share power with Central Europeans in EMU institutions.
Authored by: Jacek Rostowski
Published in 2003
Lazard Investment Research: Sunset Boulevard, An Interim Report on the Develo...LazardLazard
The introduction of the euro was implemented very quickly, culminating in 1999 when the common currency began circulation, which occurred before many outstanding questions had been resolved. The policies that composed the European Monetary Union’s (EMU) legal and economic foundation contained many cursory and often contradictory points. Consequently, the euro countries came under pressure during the financial crisis in six interdependent areas, including: liquidity, banks and the broader financial system, sovereign debt and solvency, balance of payments, competi- tiveness, and economic growth and the labor market. These problems resulted in an all-encompassing systemic crisis of confidence.
‘European financial centres will survive the crisis’ – storifymersaberden27
European-financial-centres-will-survive-the-crisis%E2%80%99# The Summit on the Global Agenda is the world’s largest brainstorming meeting attened by thought leaders of the World Economic Forum’s Network of Global Agenda Councils.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
NO1 Uk Divorce problem uk all amil baba in karachi,lahore,pakistan talaq ka m...Amil Baba Dawood bangali
Contact with Dawood Bhai Just call on +92322-6382012 and we'll help you. We'll solve all your problems within 12 to 24 hours and with 101% guarantee and with astrology systematic. If you want to take any personal or professional advice then also you can call us on +92322-6382012 , ONLINE LOVE PROBLEM & Other all types of Daily Life Problem's.Then CALL or WHATSAPP us on +92322-6382012 and Get all these problems solutions here by Amil Baba DAWOOD BANGALI
#vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore#blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #blackmagicforlove #blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #Amilbabainuk #amilbabainspain #amilbabaindubai #Amilbabainnorway #amilbabainkrachi #amilbabainlahore #amilbabaingujranwalan #amilbabainislamabad
Which Crypto to Buy Today for Short-Term in May-June 2024.pdf
20130905 sapirwolff final
1. Note for the informal ECOFIN 13/14 September 2013, Vilnius
The neglected side of banking union: reshaping Europe’s financial system
André Sapir, Guntram B. Wolff,
Bruegel
Prior to the crisis, the European Union financial system became increasingly integrated, especially within
the euro area. However, integration is far from complete. In the euro area, the interbank market rapidly
became highly integrated after the introduction of the single currency, but retail banking remains largely
fragmented along national lines, with bank mergers predominantly between institutions of the same
country. And in the EU in general, corporate bond markets and equity markets also remain fragmented
along national lines despite some progress with integration. The financial crisis undid financial
integration where it had been most successful, in the interbank market. Overall, the state of financial
integration in Europe is unsatisfactory, with markedly different financing conditions in different countries,
which undermines the necessary convergence of their economic and employment conditions.
The reform agenda should include three essential elements in order to end the fragmentation of financial
markets, to give households and corporations greater access to finance, and to ensure financial stability:
(1) The newly created Single Supervisory Mechanism will soon start an Asset Quality Review. This should
be a tough assessment of the assets held by banks. Based on this review, viable banks should be
recapitalised from private sources. Public recapitalisation should be the exception and should not amount
to bail-outs of shareholders or bank management. (2) For non-viable banks, there should be restructuring
and resolution by a Single Resolution Mechanism capable of implementing economically sensible cross-
border bank sales and mergers. More integrated retail banking would help to credibly break the vicious
circle linking banks and sovereigns because it would mean less exposure to debtors, including the
government, located in each bank's home country. (3) Finally, the EU and in particular the euro area,
need to develop a genuine cross-border equity and corporate bond market, in part to be able to absorb
shocks. The development of these markets will require further harmonisation of corporate governance,
insolvency legislation and taxation. This would reduce the heavy reliance of the EU economy on bank
funding and improve economic stability thanks to better financial risk sharing.
The timing of policy measures is paramount. Because the European economy is so dependent on bank
credit, the priority must be to solve the banking sector problems. But policymakers need to be aware that
restructuring and merger decisions taken now will undermine eventual financial stability if they are done
without allowing for sensible cross-border mergers. The second priority is to start a European reform
process to develop capital markets. This is unlikely to quickly provide a partial substitute for bank credit
but it is a crucial element in the medium-run to put Europe’s monetary union on a sound basis. The
eventual introduction of strict limits on bank exposure to sovereign borrowers, or risk weights attached to
government bonds, are also important for reducing the link between banks and sovereigns.
1
2. 1) Introduction1
Prior to the crisis, the EU financial system became increasingly integrated, especially within the euro
area. However, integration is far from complete. In the euro area, the interbank market rapidly became
highly integrated after the introduction of the single currency, but retail banking remains largely
fragmented along national lines, with bank mergers taking place predominantly between institutions in
the same country. Europe is heavily dependent on bank credit, much in contrast to the US, wheter other
forms of financial intermediation play a more important role.2
At the same time, EU corporate bond
markets and equity markets remain fragmented along national lines despite some progress with
integration. The financial crisis undid financial integration where it had been most successful, in the
interbank market. Incidentally, the financial crisis therefore undid financial integration in exactly the area
in which cross-border integration was most successful.
The euro-area financial system is now in an unsatisfactory state. Banks do not lend to each other across
borders without asking for a significant premium. In the larger euro-area countries, cross-border retail
banking plays a negligible role and therefore cannot serve as a meaningful source of credit that could
compensate for the dysfunctional interbank market. The combination of these two factors leads to
significant differences in credit conditions across the euro area and the EU. As a consequence,
corporations in some countries are at a competitive disadvantage merely because of their location, and
households cannot borrow at reasonable terms. As a result, investment remains subdued and economic
growth remains anemic. Alternative financial-intermediation channels, such as capital and equity
markets, cannot play a meaningful role in stabilising the different economies and providing sufficient
funding for business and households because of their comparatively low degree of development and
their limited cross-border integration.
This situation calls for bold policies, the timing of which is paramount. As the European economy is so
dependent on bank credit, the priority must be to solve the banking sector's problems. But decisions
taken now in this area will shape the future of Europe’s financial system, not least in terms of its stability.
For example, bank mergers could lead to more cross-border integration of retail banking thereby
reducing financial fragmentation and increasing stability. To be successful along those lines, the
implementation of banking union will therefore have to be accompanied by acceptance by governments
that they will be less involved in banks. Banks will have to become European. Similarly, insufficient re-
capitalisation would result in structurally weak banks that do not provide sufficient credit. At the same
time, capital market integration has been identified as one of the key channels for risk sharing in
monetary unions3
. To increase the stability of EMU, it therefore is advisable to develop further the
capital markets and to foster their cross-border integration: in other words to complete the single
1
Excellent research assistance by Giuseppe Daluiso, Carlos de Sousa and Erkki Vihriälä is gratefully acknowledged.
2
According to the Eurostat financial accounts, loans represented 87.5 percent of the total debt liabilities (loans over
loans plus securities other than shares) of non-financial corporations in the EU27 and 89.7 percent for the EA17 at the end of
2011. By contrast, the Federal Reserve reported that loans accounted for only 26.1 percent of the total debt liabilities (loans
over loans plus debt securities) of non-financial corporate business in the United States at the end of 2012, a share that, unlike
in Europe, has been moving downward from a peak of 41.6 percent in 2007.
3
Asdrubali, Pierfederico, Bent E. Sorensen and Oved Yosha (1996) ‘Channels of Interstate Risk Sharing: United States
1963-1990’, The Quarterly Journal of Economics, MIT Press, 111(4): 1081-1110
2
3. market for capital. Against this background, we review a number of stylised facts about Europe’s
financial system, and review the upcoming policy agenda.
2) The changing financial landscape of Europe
The financial system in the EU and other advanced economies has grown relative to GDP, and has
become more interconnected across borders. Cross-border financial assets and liabilities have increased
very substantially to reach more than 600 percent of GDP on average per euro-area country. In the UK,
the figure is over 1000 percent.
However, retail banking is generally still constrained by national borders, though small countries make
an important exception. The total assets of foreign owned branches and subsidiaries generally constitute
only a small part of the total assets of the domestic banking system (see Figure 1). Only in the smaller
member states and the non-euro area member states of central and eastern Europe is a significant part
of the banking system foreign-owned. The share of foreign asset ownership has somewhat fallen in the
euro area, while it has increased somewhat outside the euro area.
Figure 1: Percentage of the banking system that is foreign owned
Note: This percentage is calculated as the total assets of foreign owned subsidiaries/branches as % of
total banking system assets
Source: Bruegel based on ECB data.
Wholesale banking, by contrast, became highly integrated before the crisis. Since then, the share of
cross-border interbank financing has fallen substantially in the euro area. Between 1999 and 2007 in the
euro area, the foreign share of loans to Monetary and Financial Institutions (MFIs), the share of foreign
government bonds and the share of foreign corporate bonds had increased by 23 and 28 percentage
points, reaching 47 percent and 51 percent of the total holdings of government and corporate bonds,
3
4. respectively. Since the beginning of the crisis, the shares have fallen 24 and 10 percentage points,
standing at 22 percent and 41 percent respectively (Figure 2). In contrast, cross-border lending to non-
financial corporations, ie retail banking, has been at a very low level throughout EMU (Figure 2).
Figure 2: Share of cross-border holdings of assets of euro-area MFIs in total assets
Note: The lines measure the share of intra-euro area cross-border holdings in total euro-area holdings.
Source: Bruegel based on ECB data.
The counterpart to the low degree of retail banking integration is the low number of cross-border bank
mergers and acquisitions (Figure 3). Bank mergers and acquisitions in the euro area happen
predominantly within national borders. In the US, the average number of bank mergers and acquisitions
per year from 2005-12 was 343, while in Europe the yearly average only amounted to 584
. The
percentage of cross-border mergers in Europe is low. Data for all 28 EU countries is presented in the
annex. Since mergers and acquisitions are mostly domestic, the percentage of subsidiaries and branches
that are foreign-owned is correspondingly low measured in assets.
4
These numbers include only banks located in the euro area respectively in the US that have been targets.
Acquisitions outside are not counted.
4
5. Figure 3: Total number of EA17 banks being bought by banks in…
As a consequence of the impaired wholesale banking market and the absent cross-border retail banking
market, the price and availability of credit for non-financial corporations is dramatically different in
different countries. Standard measures (see the annex and the European Central Bank’s financial stability
report) indicate very significant differences in interest rates in different countries. Furthermore, in terms
of quantity restrictions, several indicators show that the likelihood of receiving a credit differs
substantially across the common currency area – in contrast to the pre-crisis period5
. In response to this
divergence, ECB liquidity was increasingly directed towards banks located in crisis countries, but liquidity
provision could not stop rates from diverging. Since the announcement of the OMT programme (Outright
Monetary Transactions), cross-border activity has either stabilised or has slightly rebounded. Overall, the
fragmentation of lending conditions is a significant disadvantage for corporations in affected countries,
and is ultimately not sustainable.
The crisis has resulted in numerous bank-support programmes in the euro area, which have so far failed
to solve the problem of financial fragmentation. In contrast to the US, the EU has had many support
programmes but very few bank closures (Figure 4). Federal Deposit Insurance Corporation (FDIC)
numbers show that since 2008, 13 banks received FDIC government support, while in the euro area and
the rest of the EU, DG Competition counts 50 instances of state aid cases for euro-area banks, and 38
cases of state aid for banks for the rest of the EU. Since 2010, the FDIC has not started a new support
programme for any bank. The FDIC reports that 494 banks failed in the US between 2008-July 2013. In
Europe, there is no official data source collecting the number of bank failures, but a data collection
project by Open Economics resulted in an estimate of 49 in the euro area and 64 in the rest of the EU6
.
5
OECD (2013) Financing SMEs and Entrepreneurs 2013: An OECD Scoreboard. Final Report
6
Data downloaded in August 21 2013 from http://openeconomics.net/failed-bank-tracker/
5
6. Figure 4: Number state aid bank support cases (other than just guarantees)
Note: state aid cases that only comprise guarantees as an aid instrument were excluded as we don’t include bank guarantees
given by the TARP program. Some state aid cases consist of national bank support schemes, therefore the number of banks that
benefit from this state aid cases is largely underestimated by the bars.
Sources: DG Competition and FDIC
Compared to the US, the European banking sector has low equity levels and a low return on equity
(Figure A2-4 in the annex). Non-risk weighted average equity in the euro-area banking sector for the
largest 10 banks with available data was 5.3 percent of total assets at the end of 2012, while in the US,
the largest 10 banks have a ratio of 12.4 percent. Despite the low equity in the euro area, the return on
equity has been comparatively low, standing at 1.7 percent at the end of 2012, compared to 8.9 percent
in the US7
. Low market-to-book values (54.9 percent in the top 10 euro-area banks compared to 97.5
percent in the top 10 US banks) further suggest that markets still believe that significant problems lurk in
the balance sheets of euro-area banks.
Other forms of financial intermediation in the euro area remain underdeveloped and there is
comparatively little cross-border financial intermediation that could help reduce financial fragmentation.
For example, equity markets remain characterised by a strong home bias. The ownership of listed
companies remains predominantly national (Figure 5). The percentages are significantly lower than
would be expected in a fully integrated market, in which investors would spread their portfolio across
the entire euro area8
. ECB data corroborates this result and shows that ownership by MFIs of foreign
shares and other corporate equity is very limited in the euro area (Figure 2). As a consequence, the
7
The figures for the top 10 euro area and US banks were compiled using SNL data services; banks included
are: BNP Paribas, Crédit Agricole, Société Générale, Natixis, Deutsche Bank, Commerzbank, UniCredit, Intesa Sanpaolo, Banco
Santander, Banco Bilbao Vizcaya Argentaria,(Dutch Banks were not included because of lack of data) in the euro area and
JPMorgan Chase & Co., Bank of America Corporation, Citigroup Inc., Wells Fargo & Company, Bank of New York Mellon
Corporation, U.S. Bancorp, Capital One Financial Corporation, PNC Financial Services Group Inc., State Street Corporation, BB&T
Corporation in the US.
8
Balta and Delgado, 2009."Home Bias and Market Integration in the EU," CESifo Economic Studies, CESifo, vol. 55(1),
pages 110-144, March.
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013
EA EU non-EA US (FDIC assistance)
6
7. effects of a shock that reduces the value of shares in one country will mostly be felt domestically
because ownership is concentrated domestically. Risk is not shared across borders and access to new
finance – because it remains national – remains constrained by the negative situation in the particular
country.
Figure 5: Proportion of equity held in euro-area countries that is of domestic origin, 2010
Note: Theoretical share of home holdings is equal to the share of domestic market capitalisation of total euro-area stock market
capitalisation.
Source: Bruegel based on World Bank data on stock market capitalisation and IMF CPIS data on cross-border holdings following
the methodology of Balta and Delgado (2009).
Overall, the euro-area banking and capital market system remains highly national. Efficiency gains are
feasible. Relatively low market-to-book values and low return rates in combination with predominantly
national merger activities suggest that the consolidation of the European banking sector still has not
happened. This is in contrast to the US, where significant mergers and the absence of governmental
support indicate that the banking system has returned to comparatively high stability. The situation is
also unsatisfactory because euro-area financial markets remain highly fragmented, meaning that
financial conditions remain very unfavourable in some countries. With the creation of a banking union,
with the first step being the single supervisory mechanism (SSM), the euro area’s banking system could
now be restructured. In terms of the capital markets, the low cross-border ownership of equity and the
underdeveloped cross-border corporate bond markets also reduce the efficiency of capital allocation,
and prevent meaningful risk-sharing across borders.
7
8. 3) Options for Europe’s financial system
Before the crisis, and despite significant progress in EU financial integration, the financing of non-
financial corporations and households remained largely domestic. Another feature of EU financial
systems, contrasting with the US system, was the importance of bank loans as a source of funding.
Domestic banks therefore played a dominant role in the financing of the EU economy. The main
exceptions were the countries that joined the EU in 2004 and 2007, where reliance on bank credit is also
very important, but banking systems are foreign-owned, mostly by western EU banks, before the crisis.
The financing of European banks, ie the wholesale interbank market, had become highly integrated,
especially within the euro area. The financial crisis, and especially the euro sovereign-debt crisis, largely
reversed the gains achieved since the introduction of the euro. It led to the fragmentation of interbank
markets along national lines, translating into a significant fragmentation of other financial markets.
Despite forceful action by the ECB to restore the integration of the interbank market, financial markets
remain fragmented, resulting in very different financing conditions for the real economy in different
euro-area countries.
The crisis has revealed three problems with Europe’s financial system. The first is that cross-border
financial intermediation happened largely through debt-based wholesale banking market integration.
This increased vulnerability to shocks and led to sudden-stop problems9
. More and better integrated
equity markets would have allowed capital markets to absorb the massive shocks with which the euro
area was confronted. The second problem is the high exposure to risk relative to the loss-absorbing
capital and debt in the banking system. This translated into increasing demands for bail-outs and
numerous public assistance programmes. The third problem is the contrast between the high degree of
(wholesale) banking market integration that prevailed before the crisis and the absence of a European
system for financial stability. This has delayed the resolution of bank difficulties and dragged down the
EU economy for a full five years10
.
The European banking union is meant to address the third problem11
. At the same time, the creation of
the banking union raises a number of issues that policymakers will need to face.
The first set of issues concerns banking itself. Here the most pressing matter is the upcoming Asset
Quality Review (AQR), which the ECB – acting as the single banking supervisor – will shortly start carry
9
Merler and Pisani-Ferry (2012), “Sudden stops in the euro area”, Bruegel policy contribution 2012/6.
10
Darvas, Pisani-Ferry, Wolff (2013), “Europe’s growth problem (and what to do about it), Bruegel Policy
Brief 2013/03.
11
The ECB has repeatedly emphasized that a true European banking union requires three pillars: the Single
Supervisory Mechanism (SSM); the Single Resolution Mechanism (SRM); and a common system of deposit
protection. It has also argued that the SSM and the SRM are indispensable complements that have to proceed in
parallel, whereas a common system of deposit protection can be added later. Also see Pisani-Ferry, Sapir, Véron,
Wolff (2012), “What kind of European banking union”, Bruegel Policy Contribution 2012/12; Pisani-Ferry and Wolff
(2012), “The fiscal implications of banking union”, Bruegel Policy Brief; Véron and Wolff (2013), “From supervision
to resolution: next steps on the road to banking union”, Bruegel Policy Contribution 2013/4; Véron (2013), “A
realistic bridge towards European banking union”, Bruegel Policy Contribution 2013/9.
8
9. out to determine the true quality of the assets on the balance sheets of those banks that it will directly
supervise from late 2014. The ECB has a clear interest in establishing itself as a tough regulator by
conducting a thorough review. After all, it does not want to be liable for problems that pre-date its
supervisory responsibility. Moreover, only a tough AQR (together with a credible stress test) will restore
confidence in the European banking system and thereby overcome the dysfunctional interbank market
and reduce the fragmentation of euro-area credit conditions.
However, a tough AQR will increase the likelihood of bank recapitalisation, which could involve the use
of public money for publicly-owned banks, or if private shareholders and convertible debt holders are
unwilling or unable to put up more money. The discussion on this matter has generally been focused on
whether the European Stability Mechanism (ESM) would be able recapitalise banks in ESM member
countries in which the government “is unable to provide financial assistance to the institutions in full
without very adverse effects on its own fiscal sustainability”12
. The more important question, however, is
if other avenues should be pursued for a bank that is under-capitalised and “unable to attract sufficient
capital from private sources or other means in order to resolve its capital problems”13
. This is where the
issue of resolution, whether through merger or termination, comes into play.
Policymakers should consider a number of issues regarding the resolution of failing banks. The first is
regulatory forbearance. It is important that the resolution of banking problems is not further delayed.
Second, a European resolution framework is needed for a number of reasons. First, it is a way of
protecting the ECB from pressure to delay triggering resolution and to keep insolvent banks with liquidity
and ELA afloat. Second, a European resolution authority is essential to ensure that bank failures do not
result in major disruption in the European banking system. The FDIC has achieved such resolution
without major disturbances in the United States14
. Third, in case of a resolution, a European rather than
a national solution is desirable to keep the financial market integrated. In particular, if a cross-border
rather than purely national merger would make sense from a business perspective, it should not be
prevented by the fragmentation of resolution authorities along national lines. As we have argued, the
low level of cross-border retail banking integration combined with the low profitability of the sector
suggests that there is ample scope to increase efficiency in European banking, including through cross-
border mergers.
How could a European resolution framework be constructed? In the new system, the ECB holds the key
to triggering resolution processes. The first important step is to create harmonised rules for all countries,
as spelled out in the Bank Recovery and Resolution Directive. The clear spelling-out of a pecking order
and rules for bail-in are essential in this regard. But this is not sufficient. A Single Resolution Mechanism
(SRM) with a Single Resolution Authority (SRA) must be established as soon as possible to operate in
tandem with the SSM. The main advantage of an SRA would be that it would offer the most credible
route towards a European approach to resolution, which is desirable, as we have outlined. Other ways of
12
Eurogroup, “ESM direct bank recapitalisation instrument”, 20 June 2013, Luxembourg.
13
Ibid.
14
In this respect, it is striking to compare the handling of two bank failures of roughly the same size:
IndyMac bank, a Californian bank with $32 billion in assets, which was taken over by FDIC in 2008 and sold in 2009;
and the Bank of Cyprus, with €37 billion in assets. The fact that only few readers will have heard of IndyMac speaks
for itself.
9
10. organising resolution are possible, but the key is to achieve as much centralisation as possible in order to
avoid the further fragmentation of banking along national lines.
The SRA should be, like the ECB, an independent institution. It should be able to quickly make decisions,
which would ensure the continuation of those parts of business that are central for financial stability,
while coming to an agreement between creditors about burden sharing based on clearly-defined rules.
The FDIC, which combines bank resolution and deposit insurance, might serve as a good model. The FDIC
is funded entirely by fees from member banks but is guaranteed by taxpayers, which means that the US
Treasury provides a line of credit to the FDIC, which it repays over time. The FDIC experience suggests
that such an approach would involve comparatively low levels of public resources and would lead to the
greater involvement of private creditors and more bank closures.
Cross-border mergers would not only increase efficiency, but would also enhance financial stability by
reducing the strong interconnection between banks, sovereigns and national economies, which currently
plagues many EU countries. Certainly, the foreign ownership of banks in central and eastern European
countries has contributed to stability when crises had domestic origins in these countries. When, on the
contrary, crises started in the home country of foreign banks, as was the case in 2008, then foreign
ownership was a source of problems for recipient countries15
. But the problem was a result of the
absence of a proper pan-European mechanism. TThis absence encouraged home-country supervisors to
demand that their banks take action that favoured home-country borrowers at the expense of host
countries. The Vienna Initiative successfully reversed this situation. A more durable way to ensure
stability in central and eastern European countries, where banking systems are dominated by western
European institutions, would be to include them in the banking union16
.
This raises a central question on which Europe needs to make up its mind, and rather soon as far as non-
viable banks are concerned. Governments will have to decide if consolidation of European banks will be
allowed to happen across borders, thereby creating truly pan-European banks, which would improve
financial stability17
. This would also reduce the close relationship between governments and banks,
which pervades both sides of bank balance sheets, and which is perhaps Europe’s greatest financial
problem18
.
On the asset side, this close relationship translates into a bias towards bank lending to governments
(partly encouraged by government regulation that assigns zero risk weights to government debt), or
15
See Franklin Allen, Krzysztof Jackowicz and Oskar Kowalewski. 2012. “The effects of foreign and
government ownership on bank lending behavior during a crisis in Central and Eastern Europe”. Mimeo.
16
See Erik Berglöf, Ralph De Haas and Jeromin Zettelmeyer. “Banking union: The view from emerging
Europe”. Vox EU, 16 October 2012. Zsolt Darvas and Guntram Wolff (2013), “Should non-euro area countries join
the single supervisory mechanism?”, Bruegel Policy Contribution 2013/6.
17
Compared to the United States, bank concentration is high in individual EU member states but low for the
EU as a whole. The share of the three largest banks in the total of all banks is roughly 50 percent in each of the six
largest EU countries (France, Germany, Italy, Poland, Spain and United Kingdom) but only slightly over 10 percent
for the EU as a whole. By contrast it about 30 percent for the US. See Michiel Bijlsma and Gijsbert Zwart. 2013. “The
Changing Landscape of Financial Markets in Europe, the United States and Japan”. Bruegel Working Paper 2013/2.
Brussels: Bruegel.
18
See, for instance, Anat Admati and Martin Hellwig. 2013. The Bankers’ New Clothes: What’s Wrong with
Banking and What to Do about It. Princeton and New York: Princeton University Press.
10
11. towards providing funds for politically-motivated projects with low, or even negative, financial returns.
On the liability side, banks receive implicit and explicit guarantees from governments that amount to
subsidies in the form of reduced funding costs. This relationship between national governments and
national champion banks is incompatible with a true European banking union19
. One way to weaken this
link would be to impose limits on the exposure of banks to any sovereign, in particular their own20
.
The second set of issues that European policymakers will need to address concerns financial activities
outside of banking. European equity markets are much smaller than US markets and are still fragmented
along national lines. Cross-border ownership of corporate bonds is also underdeveloped in the EU. As a
result, European capital markets provide far less opportunity for risk sharing between European
countries than is the case between US states21
. Better integrated European capital markets would also
provide European non-financial corporations with a source of funding other than bank borrowing.
Policymakers cannot neglect any longer the barriers that continue to hinder the integration of European
capital markets more than 20 years after the alleged completion of the single market and the
liberalisation of EU capital movement. Key elements in fostering the integration of European equity
markets include harmonisation of and improvements to corporate transparency standards,
harmonisation of corporate governance standards and harmonisation of insolvency legislation. There is
evidence that differences in legal enforcement affect private equity. While private markets can find
solutions for differences across countries, this can only be a partial remedy, inter alia because of higher
transaction costs22
. Taxation reform would also be crucial. Empirical evidence shows that differences in
taxation can lead to reductions in the valuation of equity, making it more difficult to raise new capital
across borders23
. Similarly, it would be important to take steps to improve the financing of high growth
potential firms by adopting transparency and insolvency regulation24
. This reform agenda would be
greatly beneficial as an underpinning for improved financing conditions of non-financial corporations,
and would increase the stability of the financial system. This is, of course, a long-term agenda that
cannot be seen as a substitute for the pressing need to resolve current banking problems.
Europe, and the euro area in particular, would greatly benefit from having fully integrated financial
markets – not only in banking but also for bonds and equity. This requires a financial stability framework
for banking, such as envisaged in the banking union, and appropriate measures to foster capital market
integration. Not all policies would need to be implemented at the same time to achieve the desired goal,
19
See Charles Goodhart. 2012. “Funding arrangements and burden sharing in banking resolution”. In
Thorsten Beck (ed.), Banking Union for Europe: Risks and Challenges. A VoxEU.org Book. London: CEPR.
20
See also Viral Acharya. 2012. “Banking union in Europe and other reforms. In Thorsten Beck (ed.), Banking
Union for Europe: Risks and Challenges. A VoxEU.org Book. London: CEPR; and Daniel Gros. 2013. “Banking Union
with a Sovereign Virus: The self-serving regulatory treatment of sovereign debt in the euro area”. CEPS Policy Brief
No. 289. Brussels: CEPS.
21
See Mathias Hoffmann and Bent E. Sorensen, “Don’t expect too much from EZ fiscal union – and complete
the unfinished integration of European capital markets!”, VoxEU.org, 9 November 2012 and Wolff (2012), “A
budget for Europe’s monetary union”, Bruegel Policy Contribution 2012/22..
22
Josh Lerner and Antoinnette Schoar (2005), “Does legal enforcement affect financial transactions? The
contractual channel in private equity”, Quarterly Journal of Economics, 120(1), pp. 223-246.
23
Harry Huizinga, Johannes Voget and Wolf Wagner (2012), "Who bears the burden of international
taxation? Evidence from cross-border M&As," Journal of International Economics, 88(1), pp. 186-197
24
Philippon, Thomas and Nicolas Véron (2008), Financing Europe’s fast movers, Bruegel Policy Brief 2008/01.
11
12. but it is crucial that progress be made simultaneously on the both the integration and stability fronts in
order “to be self-reinforcing and unleash virtuous dynamics” as envisaged by the ECB25
. The following
sequencing would seem appropriate:
The first step, the SSM, is already programmed, with the AQR due to start later this year and end in
March 2014. The second step will be the choice that governments make on how to handle the outcome
of the AQR if some banks, as is likely, are under-capitalised and unable to raise sufficient capital from
private sources. This will be a crucial choice for two reasons. First, governments will have to ensure not
only that all under-capitalised viable banks are recapitalised, but also that all non-viable banks fail.
Second, and equally important, governments will have to agree whether or not they accept cross-border
consolidation of European banks to deal with non-viable banks. This two-dimensional crucial choice will
be closely related to governments' willingness to accept the creation of a meaningful SRM. Without
European resolution, the banking system would remain fragmented along national lines thereby
endangering financial stability and hampering growth. Eventually, further steps should be taken to
reduce the exposure of banks to sovereign debt. This could come in the form of exposure limits or the
introduction of risk weights for sovereign debt.
The next step would be the adoption of measures to make significant progress in the integration of
European capital markets, both for corporate bonds and for equity. Here European legislators will have
to tackle issues that have long eluded them, in particular differences between EU countries in areas such
corporate governance, insolvency laws and even tax treatment of certain assets and liabilities. Creating a
truly Societas europaea subject to a single European insolvency law and taxation with a single European
corporate governance structure would be a formidable step in the creation of a pan-European, fully
integrated capital market.
4) Conclusions
The European financial system could be significantly reshaped in the coming years as a consequence of
the creation of the banking union and the need to find additional sources of financing. This may lead to a
fundamentally different banking and capital market landscape, with implications for the availability of
finance for corporations and households, economic growth and the stability of the financial system. We
have highlighted two central aspects in this regard.
The first aspect concerns the banking system. Cross-border mergers have been in a minority and retail
banking integration has been limited. More retail banking integration would help to de-link the
availability and conditions of credit from country-specific shocks and sovereign distress. But achieving
increased integration in banking will also mean accepting less industrial policy in banking.
The second aspect is the creation of integrated bond and equity markets. More cross-border ownership
would be a formidable tool for the sharing of risk and for harmonising access to finance across the EU.
25
Benoit Coeuré, “The way back to financial integration”, speech prepared for the Conference on
International Financial Integration and Fragmentation”, Banco de España and the Reinventing Bretton Woods
Committee, Madrid, 12 March 2013.
12
13. Completing the single market in the capital market would thereby help overcome one of the central
problems of monetary union – the vulnerability to shocks affecting individual countries – and would
contribute to the stability of the EU more broadly. Decisions taken now – on the relative importance of
banking versus capital markets, on the number and size of banks and on cross-border integration of
banking – will shape Europe’s financial system for years to come. The complex choice requires careful
consideration because it might be difficult to reverse.
13
14. Annex
Figure A1: Coefficients of variation for MFI interest rates on new euro-denominated loans to euro area
non-financial corporations (EA changing composition)
Note: The includes all maturities and all amounts of loans
Source: ECB
Figure A2: Equity to assets
14
15. Source: SNL
Figure A3: Price/ Book (%)
Source: SNL
Figure A4: Return on average equity
Source: SNL
List of banks included:
EA: BNP Paribas SA, Crédit Agricole SA, Société Générale SA, Natixis, Deutsche Bank AG, Commerzbank AG, UniCredit SpA, Intesa
Sanpaolo SpA, Banco Santander SA, Banco Bilbao Vizcaya Argentaria, SA (Dutch Banks were not included because of lack of data)
15
16. USA: JPMorgan Chase & Co., Bank of America Corporation, Citigroup Inc., Wells Fargo & Company, Bank of New York Mellon
Corporation, U.S. Bancorp, Capital One Financial Corporation, PNC Financial Services Group Inc., State Street Corporation, BB&T
Corporation
Merger and Acquisitions data
The main source adopted is the SNL Financial Database series, in particular the SNL Mergers and
Acquisitions database, and the SNL Companies database.
We consider a sub-set of the SNL Mergers and Acquisitions database involving deals completed in the
period 01/01/2005 to 23/08/2013 and in which either buyer or seller were located in the USA and
Europe (both Developed and Emerging). The sub-set comprises a total of 4,503 deals.
For some of the deals, only name and geographic location of the subsidiary/branch being bought is
reported; therefore the need of crossing the SNL Merges and Acquisitions database with the SNL
Companies database which reports the banks’ ownership structure. We consider a sub-set of the SNL
Companies database entailing 5,329 banks, their ultimate parent bank and relative geographic location
of both. Hence, we could update the first database with the second and so have a more realistic picture
of the M&A decisions by holding banking groups instead of subsidiaries.
After the update, it results that 2,922 deals (67% of the total 4,503) involve banks having ultimate parent
based in the US being acquired, 496 deals (11%) in the EA17, 235 (5%) in the rest of EU28 and 850 (19%)
in the rest of Europe.
Note: The number of domestic banks buying other domestic banks in the negative semi-axis is omitted to avoid redundancy.
16