The Impact of Banking Structural Reform on Household Retail Finance. ECRI Commentary No. 13, 7 October 2014

There are two main objectives behind the EC proposal on banking structural reform: the financial stability objective and the economic efficiency objective. If it is implemented, the reform should reinforce the stability and economic efficiency of household retail activities through lower contagion, better resolvability in the event of failure, more harmonised supervisory practices across the EU and more resilient household demand for retail loans. However, it could also trigger counterproductive effects that could partly undermine the expected benefits. These potential negative effects are not appropriately assessed in the impact study of the proposal published in January 2014 and will require further consideration in the coming months. In particular, the stability of household retail finance could be strengthened by placing more emphasis on bankruptcy risks of retail banks; the transfer of existing systemic activities towards less regulated and supervised markets and reputational risk. A better analysis of the borrowing costs for households (impacted by the potential decreasing diversification of the funding base of banks and scarcer liquidity) and implementation costs could help regulators to achieve the objective of efficient household activities.

Banking Business Models Monitor 2014: Europe. CEPS Paperbacks, 14 October 2014

CEPS and the International Observatory on Financial Services Cooperatives (IOFSC) at HEC Montreal have initiated an annual monitoring exercise on banking business models in the EU. Based on their balance sheet structures, 147 European banks that account for more than 80% of the industry assets were categorised in four business models. The Monitor emphasises the ownership structures and assesses the financial and economic performance, resilience and robustness, before, during and after the financial and economic crises across retail diversified-, retail focused-, investment-, and wholesale oriented banks. Inter alia, this edition of the Monitor finds that banks that engage more in traditional retail banking activities with a mix of funding sources fared well as compared to other bank models during the different phases of the crisis.

A Monetary Union Requires a Banking Union. Bruges European Economic Policy (BEEP) Briefing 33/2014

This paper argues that a monetary union requires a banking union. While the USA developed both during a time span of two centuries, the EMU was created in the course of two decades and remains unfinished as the economic pillar is largely missing. The financial crisis and the Eurocrisis have shown that a genuine banking union is even more needed for the Eurozone than a budget or a fiscal union to let the euro survive.

Towards a Banking Union: Open Issues. Bruges European Economic Policy (BEEP) Briefing 32/2014

No abstract.

A Global Analysis of of Imperfect Competition in the Banking Systems and the Latest Israeli Regulation Dealing with Market Failures. ACES Working Paper No. 3, 2007

The high concentration of the banking sector is a cross-border phenomenon that has high impact on local and global economies. This paper's main goal is to analyze the factors that impact concentration in the banking systems around the globe. The innovation of this paper is that we combined economic, "economic environment", and culture variables as explanatory variables for this analysis. We found among other things that regulation in the banking system is helpful in order to keep it competitive. We also found that when the society has more individual values rather than collective ones, its banking sector is less concentrated. In the second part of the paper we focused on the Israeli case, showing that although recent indicators of the Israeli banking system indicate a higher level of concentration and lower level of competition, it seems that the recent trend is moving toward less concentration and higher competition.

Enhancing European Cooperation in Financial Supervision and Crisis Management. ACES Working Papers, August 2009

To overcome the regulatory pitfalls, regulatory capacity and resources in financial markets governance need to be enhanced, not only at national but also at global levels. In order to shed light on policy issues and agendas in international financial policy cooperation, this paper focuses on the case of European financial integration and regulations. The analysis of policy developments at the European level in coordinating differing national interests, supervisory systems, and practices among EU member states highlights fundamental elements of global financial regulatory cooperation.

Banking Sector Soundness, Innovation, and Development: Emerging Europe and South Asia. ACES Working Papers, 2012

While most academic and practitioner researchers agree that a country’s commercial banking sector’s soundness is a very significant indicator of a country’s financial market health, there is considerably less agreement and substantial confusion surrounding what constitutes a healthy bank in the aftermath of 2007+ financial crisis. Global banks’ balance sheets, corporate governance, management compensation and bonuses, toxic assets, and risky behavior are all under scrutiny as academics and regulators alike are trying to quantify what are “healthy, safe and good practices” for these various elements of banking. The current need to quantify, measure, evaluate, and compare is driven by the desire to spot troubled banks, “bad and risky” behavior, and prevent real damage and contagion in the financial markets, investors, and tax payers as it did in the recent crisis. Moreover, future financial crisis has taken on a new urgency as vast amounts of capital flows (over $1 trillion) are being redirected to emerging markets. This study differs from existing methods in the literature as it entail designing, constructing, and validating a critical dimension of financial innovation in respect to the eight developing countries in the South Asia region as well as eight countries in emerging Europe at the country level for the period 2001 – 2008, with regional and systemic differentials taken into account. Preliminary findings reveal that higher stages of payment systems development have generated efficiency gains by reducing the settlement risk and improving financial intermediation; such efficiency gains are viewed as positive financial innovations and positively impact the banking soundness. Potential EU candidate countries: Albania; Montenegro; Serbia

Swiss Banking Secrecy; The Erosion of an Institution. IES WORKING PAPER 2/2008

Switzerland has for a long time been an important centre of banking services in Europe and beyond. Consequently, the banking sector has become important to Switzerland’s prosperity. This paper focuses on a central reason behind the success of the Swiss banking sector: the institution of banking secrecy, deeply enshrined in the Swiss history and tradition. The rapid development of international markets that eventually gave rise to a “group structuration process” has, however, progressively eroded Swiss banking secrecy. It has had to bend before the duty of transparency within the groups in order not to promote financial criminality through accelerated asset inflows. Switzerland has also had to develop a comprehensive legislative frame to tackle financial criminality, and to enter into international agreements providing for mutual assistance. This process has undoubtedly and irremediably weakened the Swiss banking secrecy. Most importantly, nevertheless, the questionable ethical and socio-economic grounds of this controversial institution could and should also start to erode it from within.

What if the Next Financial Crisis Hits the Banking Union? A Call for an “If All Else Fails” Clause. European Policy Brief No. 16, September 2013

This Policy Brief argues that the envisaged design of the Banking Union risks not being sufficient to deal with the next large-scale financial crisis. Therefore, an “if all else fails” clause should be approved, stating that the Banking Union members can provide joint last resort financing to deal with a future crisis. An agreement on the clause should be feasible because it is beneficial to all Member States.