â?¢ Capital Markets Union (CMU) is a welcome initiative. It could augment economic risk sharing, set the right conditions for more dynamic development of risk capital for high-growth firms and improve choices and returns for savers. This offers major potential for benefits in terms of jobs,...

This Policy Contribution reviews the major challenges faced by the euro area, and discusses recent initiatives and the way forward. Some implications are drawn out for Latviaâ??s euro accession, which is likely to be beneficial on balance. The euro area faces three major challenges: (1) high...

At the extraordinary EU Council of 21 July European leaders have to accomplish a triple-mission. First, they should pave the way to restoring solvency in Greece by initiating debt reduction. Softening the Greek debt burden implies i) reducing the interest rate on official lending, ii) requesting...

Jean-Claude Trichet deserves praise for fighting inflation and his handling of the financial crisis of 2007-2009. But his legacy is unfinished and we still have to see whether he will be the one who saved the euro. Important challenges remain for the incoming president.First, trust of citizens...

Stress in the interbank market has increased dramatically since July and bank stock market valuation has fallen by 22 percent on average for 60 of the most important banks tested in the EBA stress tests. I find evidence that bank stock valuation is significantly and economically meaningfully...

Credit rating agencies (CRAs) have not consistently met the expectations placed on them by investors and policymakers. It is difficult, however, to improve the quality of ratings through regulatory initiatives. In the short term, changes to the CRAsâ?? regulatory environment, in a context of...

This policy contribution was presented at the informal ECOFIN in Vilnius on September 14. It discusses how Europe's financial system could and should be reshaped. It starts from two basic points: First, the banking system needs to be credibly de-linked from the sovereigns and banks should...

The European Systemic Risk Board (ESRB) and the proposed prevention and correction of macroeconomic imbalances regulation (EIP) are designed to avoid imbalances. However, these instruments overlap, and need clarification. Both the ESRB and the Commission, which is given certain powers by the...

The Bank of England, the Federal Reserve (Fed) and the European Central Bank (ECB) have responded to the crisis with exceptional initiatives resulting in a major increase in their balance sheets. After the ECBâ??s end-2011 launch of three-year bank refinancing (LTRO), there has been speculation...

Listen to the press conference call. The European Council has outlined the creation of a Single Resolution Mechanism (SRM), complementing the Single Supervisory Mechanism. The thinking on the SRMâ??s legal basis, design and mission is still preliminary and depends on other major initiatives,...