Monday, 4 June 2012

A banking union for Europe

Key conditions from the excellent Wolfgang Munchau

The deposit insurance should have no limits. It is probably best to anchor it at the ECB itself – which would be justifiable if and when the bank recapitalisation facility was big enough. Its goal should be to stop the two types of bank run we are seeing right now. The first is sectoral: a run on weak banks, with money routed to strong banks. The second is geographic: a run on banks in weak peripheral countries, with money routed to core countries. In other words, the deposit insurance not only needs to insure deposits, but the euro value of the deposit even if the country leaves. 

Both schemes require deep institutional change. A joint recapitalisation fund needs a central supervisor with the courage and power to walk into a Spanish bank and close it down. Deposit insurance must be accompanied by a deep political union. Otherwise, it might create moral hazard by encouraging countries to leave the eurozone in safe knowledge of this guarantee. Without a commitment to further political union, deposit insurance is either ineffective or ruinous. Recapitalisation, insurance and joint supervision therefore go together.
So, a proper banking union is a very big deal indeed. 


  1. Awesome banking recapitalization issue here! The Dealing way and purpose is incredible and follow able for banking bankThanks!

  2. Thanks for sharing this interesting blog with us.My pleasure to being here on your blog..I wanna come beck here for new post from your site...!
    Essay Writing | Custom Essay Writing | Custom Thesis Writing |

  3. I found this post very nice.Thanks for sharing.
    IT Support | IT Services

  4. Thanks so much to giving us this information. Actually I am writing my essay project and getting important points from different blogs and forums and This is my pleasure to being here on this blog..
    Custom Essay

  5. Thanks so much for taking the time to submit such a comprehensive, beneficial post. I've been being "swayed" by all the positive talk. A valuable information is also available here.
    Online Essay

  6. Well actually a real informative blog like this is an exceptionally cool helping resource for a needy information seeker like me! Thanks a lot..

    Online Shopping in Pakistan

  7. Likes considerably increase the stage of popularity within your website web site and along with the correct collection depend; many people will be interested in your account. The companies that offer these answers, will deliver you with non-automated or robot likes and supply you with precise Instagram likes. The nice element concerning this is normally that they are immediately delivered for the account which means you usually do not have to have to show up at that much. And when you are a company enterprise, escalating your Instagram likes will probable be practical.