Edited by Kern Alexander and Rahul Dhumale
Chapter 7: Some Rules for Cross-border Banks in Europe
David G. Mayes Editors’ abstract: Professor David Mayes examines the balance between principles and rules in the context of European banking regulation and argues that EU member state regulators have yet to strike a balance between the use of a common rule-book and common principles for the prudential oversight of EU banks with cross-border operations. Although the chapter was written largely before the adoption of EU bank regulatory reforms in 2011, its main critique that EU bank regulation fails to provide an adequate balance between a common rule-book and common principles remains steadfast, especially in light of the lack of a structured early intervention regime for EU-based banking groups that operate on a cross-border basis. These banking organisations often pose systemic risks across EU jurisdictions and also have depositors in many European states. In addressing these risks, Mayes suggests that a common rule book with trigger points for supervisory intervention may be more effective for overseeing cross-border banking groups than primary reliance on common principles of action. While the chapter recognises that both common rules and common principles are important, a common rule book for structured early supervisory intervention is more appropriate for coordinating effective oversight of the cross-border operations of European banking groups. For PCA to work on a cross-border basis in Europe, however, it may be necessary to have further institutional consolidation at the European level to improve the oversight of European banks that operate in more than one jurisdiction or which pose systemic risk in more than...
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