Euro area governments have committed to break the doom loop between bank risk and sovereign risk. But policymakers have not reached consensus on whether and how to reform the regulatory treatment of banks' sovereign exposures. To inform policy discussions, this paper simulates portfolio...

The agreement to establish a Single Supervisory Mechanism in Europe is a major step towards a Banking Union, consisting of centralized powers for the supervision of banks, the restructuring and resolution of distressed banks, and a common deposit insurance system. In this paper, we argue that...

The European Banking Union is a major step forward in fixing major deficiencies in the institutional framework of the Euro area. The absence of effective banking supervision and resolution powers at the European level promoted excessive private risk-taking in the up-run to the Euro crisis....

We quantify the gains from regulating maturity transformation in a model of banks which finance long-term assets with non-tradable debt. Banks choose the amount and maturity of their debt trading off investors' preference for short maturities with the risk of systemic crises. Pecuniary...

The declared intention of policy makers is that future bank restructuring should be conducted through bail-in rather than bail-out. Over the past years there have been a few cases of European banks being restructured where creditors were bailed in. This paper exploits these events to investigate...