The Challenge of Financial Stability and Regulation from a European Perspective
From the early 1980s, the European banking industry has experienced significant institutional and procedural deregulation as well as cost reductions from progress in information and transaction technologies, and from the evaporation of reserve requirements. As a consequence, the industry started to act globally, developing new and by volume vastly growing instruments for financial investments and taking on board unprecedented (and not always well understood and managed) risks. Given the regulatory ease on the industry in the past, the financial crisis and subsequent actions to re-regulate banking was resented as “overkill” by some, but not going far enough by others. The divisive positions on banking regulations are typically heightened by emotions resulting from apparent dysfunctions of the industry ranging from supposedly excessive bonuses, speculation on banks’ own accounts with the risks being shifted to taxpayers, to outright fraud, including the rigging of financial data such as the London interbank offered rate (Libor), an important benchmark for financial dealings. All this has undermined confidence in the European banking industry.
KeywordsEuro Area European Central Bank Banking Supervision European Banking Authority Single Supervisory Mechanism
- Barnett-Hart AK (2009) The story of the CDO market meltdown: an empirical analysis. Dissertation, Harvard College, Cambridge MassachusettsGoogle Scholar
- Miles D (2010) Leverage and monetary policy, Monetary Policy Committee, Bank of England. Speech delivered at ESRI/FFS Conference, Dublin, 12 October 2010Google Scholar
- Sell M (2011) The new architecture for European financial supervision, Bundesanstalt für Finanzdienstleistungsaufsicht (BAFin), Germany. Speech delivered at ESE Conference, Luxembourg, 28 September 2011Google Scholar