scholarly journals The New Bail-in Regime and the Need for Stronger Market Discipline

2014 ◽  
Vol 3 (1) ◽  
pp. 85-113 ◽  
Author(s):  
Evangelos Vasileiou
Keyword(s):  
Sovereign Debt ◽  
Deposit Insurance ◽  
Market Discipline ◽  
The European Union ◽  
Ample Evidence ◽  
Long Term Stability ◽  
Banking Market ◽  
Macroeconomic Indicators ◽  
European Banking ◽  
European Banks

Effective Market Discipline (MD) puzzles financial economists and regulators for decades, while the recent bail-in legislation for European banks extremely raises the need for even stronger MD. It may not be exaggeration to say that a new regime for the European banking market is born after the aforementioned decision. This paper’s objective is the broader MD examination, using variables that are not usually included in MD studies, but concern the European Union (EU) and the European Monetary Union (EMU) in the last years. In particular, apart from banking, deposit insurance and pure macroeconomic indicators, we also include governance and sovereign debt indices. The new regime may need a new MD approach. We choose Greece to implement our assumptions, because it is the country with the most severe economic, sovereign and governance problems in the EU. We employ data for the period 2002-10. The empirical evidence supports that market discipline is superficial, while there is ample evidence that MD is directly influenced by the poor governance performance and the excessive government debt. Greek authorities have to make major structural reforms in order to create the conditions for long-term stability, while our analysis points out some EMU’s shortfalls.

Banking in Europe

2019 ◽  
pp. 999-1032
Author(s):  
John Goddard ◽  
Philip Molyneux ◽  
John O. S. Wilson
Keyword(s):  
Financial Services ◽  
Sovereign Debt ◽  
Financial Integration ◽  
Banking Industry ◽  
Debt Crisis ◽  
The European Union ◽  
Fully Integrated ◽  
European Banking ◽  
European Banks ◽  
And Performance

This chapter focuses on the evolution of the banking industry in the European Union since the signing of the Treaty of Rome in 1957 to the present day. We provide an overview of developments in the regulation, financial integration, and the structure and performance of the European banking industry. A brief discussion of the global financial crises and their resultant impact on European banks together with coverage of the later Eurozone sovereign debt crisis is also presented, along with structural reforms, and the ongoing progress in creating a fully integrated banking and financial services industry throughout the Eurozone. A major challenge for the industry relates to restoring profitability back to pre-crises levels. At present, many banks remain encumbered by regulatory demands that, while helping their solvency, act as a drag on performance. Given the regulatory and economic environment under which European banks currently operate, their performance will be subdued for some time to come.

Financial Market Integration and EMU

2020 ◽  
Author(s):  
Kern Alexander
Keyword(s):  
Market Integration ◽  
Banking Sector ◽  
Financial Integration ◽  
Banking Union ◽  
Shadow Banking ◽  
The European Union ◽  
Financial Market Integration ◽  
Banking Market ◽  
Capital Markets Union ◽  
European Banking

This chapter discusses the evolution of the market structure in European banking and the level of financial integration in the Eurozone and the interaction with financial regulatory developments. The chapter will address how the creation of the Banking Union’s Single Supervisory Mechanism (SSM) has affected banking market integration in the Eurozone. The chapter also raises related issues concerning monetary policy and banking supervision and some of the challenges in discharging these responsibilities within the Banking Union. This chapter also analyses the Capital Markets Union (CMU) proposal in respect of its important objective to increase the supply of credit from non-bank financial intermediaries to the economy of the European Union (EU) while also raising important prudential regulatory concerns concerning the risks raised by the shadow banking sector.

scholarly journals Financial and Banking Regulation and Supervision within the EU

2013 ◽  
Vol 3 (2) ◽  
pp. 17-37
Author(s):  
Constanze Lehleiter
Keyword(s):  
Financial Stability ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Banking Regulation ◽  
Capital Requirements ◽  
Green Paper ◽  
Shadow Banking ◽  
The European Union ◽  
European Banking ◽  
The Eu

AbstractThe European Union (EU) has faced not only the international financial crisis, but also the European banking and the sovereign debt crisis. A lack of efficient regulations and supervision were a serious cause of recent developments. As a reaction, the EU finally implemented a framework covering both micro- and macro-prudential policies. Measures such as the new capital requirements, the deposit guarantee schemes, the green paper on shadow banking and, most importantly, the new approach for a macro-prudential supervision are headed towards crisis prevention. However, the challenge is to define regulations enhancing financial stability, which, at the same time, do not prevent institutions from generating reasonable financial risks and do not reduce growth. In that regard, the presented measures still have deficits which have to be faced. Furthermore, coordination between various authorities and the European Commission remains another challenge.

Towards a full harmonization of the European banking regulation: Dilemmas in a legal discourse between regulation and enforcement

2019 ◽  
Vol 26 (2) ◽  
pp. 190-216
Author(s):  
Matteo De Poli ◽  
Pierre de Gioia Carabellese
Keyword(s):  
European Union ◽  
Sovereign Debt ◽  
Banking Sector ◽  
Debt Crisis ◽  
Banking Regulation ◽  
Main Theme ◽  
The European Union ◽  
Single Supervisory Mechanism ◽  
Legal Literature ◽  
European Banking

With the birth of the Single Supervisory Mechanism came the emergence of a new regime of supervision of the banking industry in the Eurozone. The allocation of enforcement powers between the European Central Bank and the National Competent Authorities is the corollary of the unified supervision, which reverberates from the Single Supervisory Mechanism, and it is ultimately the main theme of this contribution. More specifically, the architecture of the enforcement, principally shaped by the SSM and its principles and rules, is assessed and analysed in this paper against the background of the general theory of enforcement, as developed in the legal literature. The enforcement discourse in the European Union banking sector is debated alongside its interaction with the related aspects of the regulation and supervision and the way these three notions have been integrated and codified in the European Union after the 2011 sovereign debt crisis.

Macroeconomic Trends in the New Member Countries of the European Union Before the Euro Area Debt Crisis

2014 ◽  
Vol 61 (2) ◽  
pp. 197-217
Author(s):  
Ivan Krumov Todorov
Keyword(s):  
European Union ◽  
Euro Area ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Labour Productivity ◽  
The European Union ◽  
Macroeconomic Policies ◽  
Wide Range ◽  
Macroeconomic Indicators ◽  
Current Account Balances

Abstract The objective of this paper is to outline the main macroeconomic trends in the new member countries of the European Union before the Euro Area debt crisis. In order to achieve this objective, the developments in a wide range of macroeconomic indicators (exchange rates, foreign trade, monetary policy, inflation, price levels, and fiscal balances, sovereign debt, GDP, labour productivity, composition of output and current account balances) have been analyzed. The analysis results in recommendations on the macroeconomic policies the new member countries should have implemented under global crisis condition in accordance with the peculiarities of their economies and their specific national priorities.

Bank stockholders’ vs bank bondholders’ market discipline during crisis time: an investigation based on supervisory stress test information disclosure

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moustapha Daouda Dala
Keyword(s):  
Financial Distress ◽  
Information Disclosure ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Stress Test ◽  
Abnormal Returns ◽  
Market Discipline ◽  
Content Type ◽  
European Sovereign Debt Crisis ◽  
European Banking

Purpose This paper aims to investigate how stockholders and bondholders react to the information disclosed on the financial markets during crisis periods. This paper considers the 2011 European Banking Authority’s stress test as it disclosed detailed information about banks. Design/methodology/approach It was conducted during the European sovereign debt crisis, and this paper uses an event study methodology. This paper analyzes the average cumulative abnormal returns for different subsamples of banks. This paper compares the reactions of stockholders and bondholders to the stress test by considering pre-results announcements (signal generating process) to the publication of the results on the disclosure date, using quantitative data for each individual bank that participated in the stress test (the signal provided to the financial market). Findings This paper finds that stockholders’ reaction is more sensitive to idiosyncratic components of the disclosed information, whereas bondholders are more influenced by systematic risk. A deeper investigation shows that subordinated bondholders tend to behave quite similarly to stockholders. This specific reaction of stockholders during financial distress may make them more likely than bondholders to impose market discipline during troubled periods. Originality/value This paper brings several new insights to the behavior of stock and bond holders during times of financial distress and makes recommendations to regulators that may serve to refine communication to markets to reduce the shock of negative news.

scholarly journals The missing European Deposit Insurance Scheme

2020 ◽  
pp. 151
Author(s):  
Pery Bazoti
Keyword(s):  
Euro Area ◽  
Deposit Insurance ◽  
Banking System ◽  
Banking Union ◽  
The European Union ◽  
Risk Minimization ◽  
Insurance Scheme ◽  
European Banking Union ◽  
European Banking

The European Banking Union embarked as a highly ambitious project of the European Union as a response to the signifi cant fl aws and weaknesses in the original architecture of the European Monetary Union that became apparent during the economic crisis. However, the establishment of a single European banking system has stumbled upon the creation of a common deposit insurance scheme that could safeguard depositors and create a more stable fi nancial framework in the euro area. The European Deposit Insurance Scheme (EDIS) was fi rstly introduced by the European Commission in 2015. As a bold proposal that comprises wide risk mutualization among the euro area member states, it has spurred a vivid discussion in the European public speech and many proposals have been made since then altering its original planning in an effort to tackle the moral hazard concerns that have risen. The present article, after discussing the reasons that keep obstructing EDIS, presents these suggestions that move around, primarily, the role of the national deposit guarantee schemes. However, as highlighted in the article, before moving to any alterations on the structure and role of a proposed common deposit insurance scheme, signifi cant risk minimization on behalf of the national banking systems, must precede by limiting the sovereign exposures of banks and the size of the Non-Performing Loans. Such steps of risk minimization are critical for addressing concerns and the political unwillingness demonstrated by several European countries in moving forward towards deeper integration.

scholarly journals What drives the greater or lesser usage of forbearance measures by banks?

2020 ◽  
Author(s):  
Paola De Vincentiis
Keyword(s):  
Subprime Crisis ◽  
The European Union ◽  
Loan Loss ◽  
Accounting Data ◽  
The Public ◽  
Data Comparability ◽  
European Banking ◽  
European Banks ◽  
Public Dataset ◽  
Asset Quality

Abstract After the subprime crisis, with the worsening of asset quality all around Europe, a lack of harmonization emerged concerning credit classification, monitoring, provisioning and writing-off in the banking industry. A wave of analysis and new regulations by the Supervising Authorities aimed at highlighting best practices and creating a common standard, in order to enhance transparency and accounting data comparability across the European Union. A point of particular attention concerned the usage of forbearance measures and the classification and provisioning of forborne positions. This paper deep-dives into this issue leveraging on the public dataset disclosed by the European Banking Authority, following the 2018 EU-wide Transparency Exercise. The purpose of this paper is twofold. On one side, we want to gauge the extension of the forbearance measures’ usage among a sample of major European banks and the drivers of this usage. On the other side, we want to analyze which main factors impact on the loan loss provisioning of forborne positions.

3 The European Deposit Insurance Framework

2015 ◽  
Author(s):  
Kleftouri Nikoletta
Keyword(s):  
European Union ◽  
Financial Markets ◽  
Deposit Insurance ◽  
Banking Sector ◽  
Economic Damage ◽  
The European Union ◽  
European Banking ◽  
National Governments ◽  
Capital Injections ◽  
Deposit Guarantee Schemes

The euro’s launch in 1999 accelerated the integration of Europe’s financial markets. Upheavals in the banking sector and debt markets since 2007 have, however, both reinforced (regulatory and supervisory reforms) and halted (government protectionism) this development. The latter ‘renationalization’ process was accentuated by the enormous amounts of state aid that national governments channelled to banks through public loans, capital injections, and guarantees. The European Union consequently faced two equally important and complex challenges—plugging regulatory and supervisory gaps to prevent future crises, while limiting the economic damage of the crisis—which the chapter reviews from a depositor protection perspective. The chapter examines the guiding 1994 Deposit Guarantee Schemes Directive, and identifies relevant regulatory and supervisory reforms that have taken place since 2007, including the 2014 recast Directive and creation of the European Banking Authority. It concludes by offering an overview of the main critiques of these regulatory and supervisory developments.

scholarly journals European Banking Union: a two-stroke reality

2020 ◽  
Vol 6 (1) ◽  
pp. 79-99
Author(s):  
Vitor Carlos Almeida da Silva
Keyword(s):  
Sovereign Debt ◽  
Deposit Insurance ◽  
Banking Union ◽  
European Banking Union ◽  
The Third ◽  
European Project ◽  
The Face ◽  
European Banking ◽  
To Come ◽  
Economic And Financial Crisis

This paper focuses on the study concerning the European Banking Union’s conclusion. The European Banking Union was scheduled to come into existence in 2013, but it did not become a reality until 2014 when it implemented its first pillar: The Single Supervisory Mechanism. This European project appears, after the economic and financial crisis of 2007-2008 and the sovereign debt crises of 2010, as a fundamental complement to Economic and Monetary Union, since it is one of the blocks that allows its deepening, harmonising the supervision, resolution and protection of depositors in the Euro Zone. However, the third pillar, the European Deposit Insurance Scheme, has not yet been implemented, contributing to the non completion and inefficiency of this European project in the face of a new financial crisis.This text seeks to contribute to a better understanding of the European Banking Union and its pillars. It is divided into three parts: the first part is a brief background on the motivations behind the creation of the Banking Union; the second part concerns the three pillars that constitute it; and the third and final part is a brief conclusion on the outcome of this European project.

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