"This essay shows that government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervision and eventually produce banking crisis. For political reasons, most countries establish a regulatory culture that embraces three economically contradictory...

European Union (EU) countries offer a unique experience of financial regulatory and supervisory integration, complementing various other European integration efforts following the Second World War. Financial regulatory and supervisory integration was a very slow process before 2008, despite...

Cross-border banking is currently not stable in Europe. Cross-border banks need a European safety net. Moreover, a truly integrated European-level banking system may help to break the diabolical loop between the solvency of the domestic banking system and the fiscal standing of the national...

Both theory (game theory) and practice (recent financial crisis) indicate that national interests prevail in cross-border resolution. National authorities aim for the least-cost solution for domestic taxpayers. This results in an undersupply of the public good of global financial stability....

Since the European Council of June 2012, ‘Banking Union' is a key item for the EU's policy agenda. This contribution outlines the state of the policy debate – identifying the elements that are missing but important from a theoretical viewpoint. We make concrete proposals as to how the...

This essay shows that government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervision and eventually produce banking crisis. For political reasons, most countries establish a regulatory culture that embraces three economically contradictory...

In the aftermath of the financial crisis, governments are rightly reducing their exposure to the banking system. Bail-in arrangements should ensure that shareholders and creditors take the first losses. The next line of defence is a resolution fund, which is filled via levies on banks....