Last Call for a Banking Union in the Euro Area
Applied Economics Quarterly (formerly: Konjunkturpolitik), 2012, vol. 58, issue 2, 153-170
The current monetary policy framework to avert the ongoing financial disintegration in the eurozone and to break the vicious circle that ties up banks and governments in a death grip (liquidity ring-fencing) does not allow effective policies to deal properly with the problems affecting interbank cross-border money market lending or merger and acquisition activities of banks. To promote a real "banking union," this paper proposes two complementary interventions: a monetary policy intervention and an institutional set-up coupled with common recovery and liquidation procedures. The monetary policy operations, whether through unconventional open market operations or indirect funding of ad hoc vehicles, would need to stabilise the sovereign debt market to break the link between counterparty and country risk, which has boosted adverse selection and frozen the interbank market. Common EU recovery and liquidation procedures, on the other hand, would further promote banks' business integration and international diversification. An independent authority would implement these rules, with access to a resolution fund or a common deposit guarantee scheme.
Keywords: banking union; EMU; eurozone; crisis management; ECB; monetary policy; collective action problem; interbank market (search for similar items in EconPapers)
JEL-codes: E58 E65 G28 G33 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers (2008 onwards); Pay-per-view access from http://ejournals.duncker-humblot.de/loi/aeq or from http://www.genios.de (2006 onwards with 2 years moving wall)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aeq:aeqaeq:v58_y2012_i2_q2_p153-170
Ordering information: This journal article can be ordered from
http://www.duncker-h ... nomicsquarterly.html
Access Statistics for this article
Applied Economics Quarterly (formerly: Konjunkturpolitik) is currently edited by Ansgar Belke, Uwe Sunde and Winfried Koeniger
More articles in Applied Economics Quarterly (formerly: Konjunkturpolitik) from Duncker & Humblot, Berlin
Bibliographic data for series maintained by Deborah Anne Bowen ().