Regulatory aftermath of banking rescues: More Europe or business as usual?

Kudrna, Zdenek (2011) Regulatory aftermath of banking rescues: More Europe or business as usual? UNSPECIFIED. (Submitted)

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Abstract

This paper analyzes the EU experience with the cross-border banking failures during the crisis and evaluates the post-crisis reform proposals in the light of this experience. It shows that the Commission considered substantive reforms that would shift the crossborder bank resolution regime to the EU level to match the operational presence of pan- European banks. However, the political compromises on the European System of Financial Supervisors in the Council, led the Commission to withdraw from more ambitious proposals in favor of gradual improvements of the pre-crisis status quo. The reformed structures are still too complex to be functional in real-time under the pressure of a financial crisis and they leave too many crucial issues such as sharing of information and of fiscal burdens in the domain of non-binding soft law agreements yet to be prepared by supervisory colleges. The new framework does not change the exclusively national accountability of supervisory authorities, thus the new regime is unlikely to prevent non-cooperative resolution strategies. The first round of post-crisis regulatory reforms brings in more Europe to the cross-border bank resolution regime, but just barely so.

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