I analyze the optimal design of banking supervision in the presence of cross-border lending. Cross-border lending could imply that an individual bank failure in one country could trigger negative spillover effects in another country. Such cross-border contagion effects could turn out to be...

A perceived need to increase nominal wage flexibility as a substitute for domestic monetary policy and a tendency to less wage moderation are likely to promote bargaining co-ordination and social pacts in the EMU. But such co-ordination is not likely to be sustainable in the long run, as it...

This paper argues that in the European Union (EU) deposit insurance funds are too difficult to use in bank resolution and too easy to use outside resolution. The paper proposes reforms in three areas for the effective management of bank failures of small and medium-sized banks in the European...

The Single Supervisory Mechanism was introduced to eliminate the common-pool problem and limit uncontrolled lending by national central banks (NCBs). We analyze its effectiveness. Second, we model how, by forbearing and providing refinancing credit, NCBs avoid domestic resolution costs and,...

In this paper, we discuss whether and how bank lobbying can lead to regulatory capture and have real consequences through an overview of the motivations behind bank lobbying and of recent empirical evidence on the subject. Overall, the findings are consistent with regulatory capture, which...

We examine the fiscal footprint of macroprudential policy in euro area countries arising through the bond market channel (Reis, 2021). Using local projections, we estimate impulse responses of the fiscal balance to an unexpected tightening in macroprudential capital regulation. Our findings...

European finance is becoming increasingly cross-border, while the European architecture for safeguarding financial stability - including decision-making processes for providing financial-stability public goods - have remained decentralized with some explicit mechanisms for coordination across...

This paper analyses the process of disintermediation, the progress in consolidation, the impact of new technologies, and the role of ownership and control structures for the euro area banking sector. The impact of these trends on competition policy, ""too big to fail"" concerns, and financial...

The EU is deliberating the introduction of an explicit ""European mandate"" for financial sector supervisors to supplement national mandates. Suggestions are made on (i) the formulation of a European mandate; (ii) the policy areas to which it should apply; (iii) which institutions should be given...