Table of Contents

The Challenge of Economic Rebalancing in Europe

The Challenge of Economic Rebalancing in Europe

Perspectives for CESEE Countries

Edited by Ewald Nowotny, Doris Ritzberger-Grünwald and Helene Schuberth

In the long aftermath of the acute global financial crisis of 2008/09, “rebalancing” the economy with new sources of growth and productivity remains a persistent necessity. This book addresses the resulting trade-offs and challenges. These needs, and the corresponding policy challenges, are especially prevalent in Europe, in particular Central, Eastern and South-Eastern Europe. On this issue, this book contributes lessons learned from earlier balance sheet recessions. It also addresses the often overlooked link between macroeconomic imbalances and economic inequality. Further contributions focus on the interaction between monetary policy and financial stability, adding a regional perspective to these important issues.

Chapter 12: Europe’s banking union: glass half full or glass half empty?

Thorsten Beck

Subjects: economics and finance, financial economics and regulation, international economics, money and banking

Extract

The European debt crisis united European Union (EU) policy-makers in the goal of centralizing bank supervision and crisis management in the event of bank failures, with a view to ending taxpayer bailouts and taking key decisions out of national hands through the creation of a banking union. The banking union was to consist of three pillars, the first of which – the Single Supervisory Mechanism (SSM) – was established when the European Central Bank (ECB) took over responsibility for bank supervision (directly for the largest banks, indirectly for all banks) in the euro zone in late 2014, following a year-long ‘comprehensive assessment’ effort to assess capital positions across the largest banks in the euro zone and to apply stress tests to these capital positions to establish their resilience. By that time, European authorities had agreed on the second pillar of the banking union, the Single Resolution Mechanism (SRM), to come into effect in 2016. The SRM will be a coordination mechanism on top of national resolution mechanisms that also involves the European Commission, the European Council, the ECB and national resolution authorities. A third pillar, a joint deposit insurance funding scheme, has been quietly dropped. These events are important steps for the euro zone and the EU towards the recovery of a sound and stable banking system and the single European market in banking.

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