Implementing Basel III in Europe: disgnosis and avenues for improvement. CEPS Policy Brief No. 275, 27 June 2012

This Policy Brief provides a preliminary diagnosis of the proposed regulatory reforms contained in the Capital Requirements Directive and Regulation (CRD IV-CRR), which translate into EU law the Basel III standards adopted by the Basel Committee for Banking Supervision, and suggests avenues for improvement. The main criticism is that the proposal is not ambitious enough. In some crucial areas, such as the leverage ratio and the long-term liquidity requirements adopted under the Basel III framework, the CRD IV-CRR proposal stops short of making a strict commitment to introduce binding requirements and instead is contented with weaker (and possibly divergent) disclosure requirements.

Policy Lessons for Macroeconomic and Financial Crisis Management in the Southern and Eastern Mediterranean. CEPS Policy Brief No. 308, 13 December 2013

This Policy Brief attempts to draw lessons from the combination of the global financial crisis and the Arab uprisings focusing on the domains related to fiscal, monetary and financial policies. It does so by answering the following questions: What has been the impact of the crisis and the uprisings on the fiscal, monetary and financial policies of the SEMCs? What have been the crisis management actions? And what policy lessons can be drawn for crisis management in the future? And how can the EU contribute to this within the Euro-Med Partnership?

Paving the Way for Micro-, Small- and Medium-Sized Enterprises in the Southern Mediterranean. CEPS Policy Brief No. 314, 14 January 2014

The upheavals of the Arab Spring in the southern Mediterranean led to domestic and international demands on the governments in the region to implement reforms aimed at enhancing business and investment conditions especially for micro, small- and medium-sized enterprises (MSMEs), which carry out an overwhelming majority of the region’s economic activity. A comprehensive survey among some 600 high-growth potential MSMEs in Algeria, Egypt, Morocco and Tunisia identified and ranked the key obstacles impeding their high-growth potential. This Policy Brief summarises the main results and policy recommendations that can be drawn from this survey, which has been analysed in depth by Ayadi & De Groen (2014).

Micro-, Small- and Medium-Sized Enterprises with High-Growth Potential in the Southern Mediterranean: Identifying Obstacles and Policy Responses. CEPS Paperbacks. January 2014

The Arab Spring, which took root in Tunisia and Egypt in the beginning of 2011 and gradually spread to other countries in the southern Mediterranean, highlighted the importance of private-sector development, job creation, improved governance and a fairer distribution of economic opportunities. The developments led to domestic and international calls for the region’s governments to implement the needed reforms to enhance business and investment conditions, modernise their economies and support the development of enterprises. Central to these demands are calls to enhance the growth prospects of micro-, small- and medium-sized enterprises (MSMEs), which represent an overwhelming majority of the region’s economic activity.

Macroeconomic and Financial Crisis Management in the Southern and Eastern Mediterranean: Diagnosis and Prospects. CEPS Paperbacks. December 2013

The global financial crisis, which started in the summer of 2007 and deepened in the aftermath of the Lehman failure in September 2008, has led to a virtual collapse in economic activity and increased financial volatility worldwide. For the developing countries, the main channel of transmission has been a drop in external transactions, such as trade, financial and capital flows, and remittances. The emerging economies in the southern and eastern Mediterranean have also faced declining economic activity, although there seems to be considerable variation in the relative magnitude and timing. Most of these economies have shown a delayed but more lasting response to the crisis, driven mostly by their close trade and investment ties with the EU and the Gulf Cooperation Council (GCC) countries. This book explores the fiscal, monetary and financial effects of the crisis in the region and provides an in-depth analysis of the fiscal, monetary and banking policies in the post-crisis era, the viability of their exit strategies and the future of reforms in the region. These analyses not only provide a comprehensive comparison between the countries but also provide a solid basis for assessing future economic and financial developments and reforms in the region.

Regulation of European Banks and Business Models: Towards a new paradigm? CEPS Paperbacks. June 2012

Amidst talks of establishing an EU-wide banking union, the recent changes in the regulatory framework and the rethinking of the future of European banking structure, the future of EU bank regulation is inextricably linked to banks’ business models. Using a sample of over 70 banks, which overlaps with those subjected to the EBA’s 2011 stress tests, this report emphasizes the key regulatory gaps that emerge from a comprehensive analysis of the soundness and performance of bank business models and provides policy-makers with guidance to reinforce the evolving regulatory framework in European banking.

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.

The ECB AQR and the EBA Stress Test: What will the numbers tell? CEPS Commentary, 23 October 2014

From the Introduction. With the results of its asset quality review (AQR), to be published on 26 October 2014, the European Central Bank intends to provide clarity on the shape of the 120 banks it will supervise in the eurozone, and it may request a series of follow-up actions before assuming its new set of tasks under the Single Supervisory Mechanism (SSM) Regulation in November. On the same day, the European Banking Authority (EBA) will also be publishing the results of its stress test, covering 123 banks across 22 European Economic Area (EEA) countries. For the ECB, it will be a matter of setting the standard for its future task, whereas EBA, seeks to restore the confidence it lost in the 2011 stress test and 2012 capital exercise. Both institutions will need to indicate how they will cooperate in the future in these tasks, and through enhanced disclosure, strengthen the confidence in the European banking system.

Was the ECB’s Comprehensive Assessment up to standard? CEPS Policy Brief No. 325, 10 November 2014

The Comprehensive Assessment conducted by the European Central Bank (ECB) represents a considerable step forward in enhancing transparency in euro-area banks’ balance sheets. The most notable progress since the previous European stress test has been the harmonisation of the definition of non-performing loans and other concepts as well as uncovering hidden losses, which resulted in a €34 billion aggregate capital-charge net of taxes. Despite this tightening, most banks were able to meet the 5.5% common equity tier 1 (CET1) threshold applied in the test, which suggests that the large majority of the euro-area banks have improved their financial position sufficiently that they should no longer be constrained in financing the economy. As shown in this CEPS Policy Brief by Willem Pieter de Groen, however, the detailed results provide a more nuanced picture: there remain a large number of the banks in the euro area that are still highly leveraged and in many cases unable to meet the regulatory capital requirements that will be introduced in the coming years under the adverse stress test scenario.

Benchmarking the Financial Sector in the Southern and Eastern Mediterranean Countries and Projecting 2030 Financial Sector Scenarios. MEDPRO Technical Report No. 31/March 2013

This paper aims at devising scenarios for the development of the financial system in the southern and eastern Mediterranean countries (SEMCs), for the 2030 horizon. The results of our simulations indicate that bank credit to the private sector, meta-efficiency and stock market turnover could reach at best 108%, 78% and 121%, respectively, if the SEMCs adopt the best practices in Europe. These scenarios are much higher than those of the present levels in the region but still lower than the best performers in Europe. More specifically, we find that improving the quality of institutions, increasing per capita GDP, opening further capital account and lowering inflation are needed to enable the financial system in the region to converge with those of Europe.