The firm. Techno-organizational changes, industrial relations and performances. An enquiry on Reggio Emilia local industrial system

It is not unknown that the evolution of firm theories has been developed along a path paved by an increasing awareness of the organizational structure importance. From the early “neoclassical” conceptualizations that intended the firm as a rational actor whose aim is to produce that amount of output, given the inputs at its disposal and in accordance to technological or environmental constraints, which maximizes the revenue (see Boulding, 1942 for a past mid century state of the art discussion) to the knowledge based theory of the firm (Nonaka & Takeuchi, 1995; Nonaka & Toyama, 2005), which recognizes in the firm a knnowledge creating entity, with specific organizational capabilities (Teece, 1996; Teece & Pisano, 1998) that allow to sustaine competitive advantages. Tracing back a map of the theory of the firm evolution, taking into account the several perspectives adopted in the history of thought, would take the length of many books. Because of that a more fruitful strategy is circumscribing the focus of the description of the literature evolution to one flow connected to a crucial question about the nature of firm’s behaviour and about the determinants of competitive advantages. In so doing I adopt a perspective that allows me to consider the organizational structure of the firm as an element according to which the different theories can be discriminated. The approach adopted starts by considering the drawbacks of the standard neoclassical theory of the firm. Discussing the most influential theoretical approaches I end up with a close examination of the knowledge based perspective of the firm. Within this perspective the firm is considered as a knowledge creating entity that produce and mange knowledge (Nonaka, Toyama, & Nagata, 2000; Nonaka & Toyama, 2005). In a knowledge intensive organization, knowledge is clearly embedded for the most part in the human capital of the individuals that compose such an organization. In a knowledge based organization, the management, in order to cope with knowledge intensive productions, ought to develop and accumulate capabilities that shape the organizational forms in a way that relies on “cross-functional processes, extensive delayering and empowerment” (Foss 2005, p.12). This mechanism contributes to determine the absorptive capacity of the firm towards specific technologies and, in so doing, it also shape the technological trajectories along which the firm moves. After having recognized the growing importance of the firm’s organizational structure in the theoretical literature concerning the firm theory, the subsequent point of the analysis is that of providing an overview of the changes that have been occurred at micro level to the firm’s organization of production. The economic actors have to deal with challenges posed by processes of internationalisation and globalization, increased and increasing competitive pressure of less developed countries on low value added production activities, changes in technologies and increased environmental turbulence and volatility. As a consequence, it has been widely recognized that the main organizational models of production that fitted well in the 20th century are now partially inadequate and processes aiming to reorganize production activities have been widespread across several economies in recent years. Recently, the emergence of a “new” form of production organization has been proposed both by scholars, practitioners and institutions: the most prominent characteristic of such a model is its recognition of the importance of employees commitment and involvement. As a consequence it is characterized by a strong accent on the human resource management and on those practices that aim to widen the autonomy and responsibility of the workers as well as increasing their commitment to the organization (Osterman, 1994; 2000; Lynch, 2007). This “model” of production organization is by many defined as High Performance Work System (HPWS). Despite the increasing diffusion of workplace practices that may be inscribed within the concept of HPWS in western countries’ companies, it is an hazard, to some extent, to speak about the emergence of a “new organizational paradigm”. The discussion about organizational changes and the diffusion of HPWP the focus cannot abstract from a discussion about the industrial relations systems, with a particular accent on the employment relationships, because of their relevance, in the same way as production organization, in determining two major outcomes of the firm: innovation and economic performances. The argument is treated starting from the issue of the Social Dialogue at macro level, both in an European perspective and Italian perspective. The model of interaction between the social parties has repercussions, at micro level, on the employment relationships, that is to say on the relations between union delegates and management or workers and management. Finding economic and social policies capable of sustaining growth and employment within a knowledge based scenario is likely to constitute the major challenge for the next generation of social pacts, which are the main social dialogue outcomes. As Acocella and Leoni (2007) put forward the social pacts may constitute an instrument to trade wage moderation for high intensity in ICT, organizational and human capital investments. Empirical evidence, especially focused on the micro level, about the positive relation between economic growth and new organizational designs coupled with ICT adoption and non adversarial industrial relations is growing. Partnership among social parties may become an instrument to enhance firm competitiveness. The outcome of the discussion is the integration of organizational changes and industrial relations elements within a unified framework: the HPWS. Such a choice may help in disentangling the potential existence of complementarities between these two aspects of the firm internal structure on economic and innovative performance. With the third chapter starts the more original part of the thesis. The data utilized in order to disentangle the relations between HPWS practices, innovation and economic performance refer to the manufacturing firms of the Reggio Emilia province with more than 50 employees. The data have been collected through face to face interviews both to management (199 respondents) and to union representatives (181 respondents). Coupled with the cross section datasets a further data source is constituted by longitudinal balance sheets (1994-2004). Collecting reliable data that in turn provide reliable results needs always a great effort to which are connected uncertain results. Data at micro level are often subjected to a trade off: the wider is the geographical context to which the population surveyed belong the lesser is the amount of information usually collected (low level of resolution); the narrower is the focus on specific geographical context, the higher is the amount of information usually collected (high level of resolution). For the Italian case the evidence about the diffusion of HPWP and their effects on firm performances is still scanty and usually limited to local level studies (Cristini, et al., 2003). The thesis is also devoted to the deepening of an argument of particular interest: the existence of complementarities between the HPWS practices. It has been widely shown by empirical evidence that when HPWP are adopted in bundles they are more likely to impact on firm’s performances than when adopted in isolation (Ichniowski, Prennushi, Shaw, 1997). Is it true also for the local production system of Reggio Emilia? The empirical analysis has the precise aim of providing evidence on the relations between the HPWS dimensions and the innovative and economic performances of the firm. As far as the first line of analysis is concerned it must to be stressed the fundamental role that innovation plays in the economy (Geroski & Machin, 1993; Stoneman & Kwoon 1994, 1996; OECD, 2005; EC, 2002). On this point the evidence goes from the traditional innovations, usually approximated by R&D investment expenditure or number of patents, to the introduction and adoption of ICT, in the recent years (Brynjolfsson & Hitt, 2000). If innovation is important then it is critical to analyse its determinants. In this work it is hypothesised that organizational changes and firm level industrial relations/employment relations aspects that can be put under the heading of HPWS, influence the propensity to innovate in product, process and quality of the firm. The general argument may goes as follow: changes in production management and work organization reconfigure the absorptive capacity of the firm towards specific technologies and, in so doing, they shape the technological trajectories along which the firm moves; cooperative industrial relations may lead to smother adoption of innovations, because not contrasted by unions. From the first empirical chapter emerges that the different types of innovations seem to respond in different ways to the HPWS variables. The underlying processes of product, process and quality innovations are likely to answer to different firm’s strategies and needs. Nevertheless, it is possible to extract some general results in terms of the most influencing HPWS factors on innovative performance. The main three aspects are training coverage, employees involvement and the diffusion of bonuses. These variables show persistent and significant relations with all the three innovation types. The same do the components having such variables at their inside. In sum the aspects of the HPWS influence the propensity to innovate of the firm. At the same time, emerges a quite neat (although not always strong) evidence of complementarities presence between HPWS practices. In terns of the complementarity issue it can be said that some specific complementarities exist. Training activities, when adopted and managed in bundles, are related to the propensity to innovate. Having a sound skill base may be an element that enhances the firm’s capacity to innovate. It may enhance both the capacity to absorbe exogenous innovation and the capacity to endogenously develop innovations. The presence and diffusion of bonuses and the employees involvement also spur innovative propensity. The former because of their incentive nature and the latter because direct workers participation may increase workers commitment to the organizationa and thus their willingness to support and suggest inovations. The other line of analysis provides results on the relation between HPWS and economic performances of the firm. There have been a bulk of international empirical studies on the relation between organizational changes and economic performance (Black & Lynch 2001; Zwick 2004; Janod & Saint-Martin 2004; Huselid 1995; Huselid & Becker 1996; Cappelli & Neumark 2001), while the works aiming to capture the relations between economic performance and unions or industrial relations aspects are quite scant (Addison & Belfield, 2001; Pencavel, 2003; Machin & Stewart, 1990; Addison, 2005). In the empirical analysis the integration of the two main areas of the HPWS represent a scarcely exploited approach in the panorama of both national and international empirical studies. As remarked by Addison “although most analysis of workers representation and employee involvement/high performance work practices have been conducted in isolation – while sometimes including the other as controls – research is beginning to consider their interactions” (Addison, 2005, p.407). The analysis conducted exploiting temporal lags between dependent and covariates, possibility given by the merger of cross section and panel data, provides evidence in favour of the existence of HPWS practices impact on firm’s economic performance, differently measured. Although it does not seem to emerge robust evidence on the existence of complementarities among HPWS aspects on performances there is evidence of a general positive influence of the single practices. The results are quite sensible to the time lags, inducing to hypothesize that time varying heterogeneity is an important factor in determining the impact of organizational changes on economic performance. The implications of the analysis can be of help both to management and local level policy makers. Although the results are not simply extendible to other local production systems it may be argued that for contexts similar to the Reggio Emilia province, characterized by the presence of small and medium enterprises organized in districts and by a deep rooted unionism, with strong supporting institutions, the results and the implications here obtained can also fit well. However, a hope for future researches on the subject treated in the present work is that of collecting good quality information over wider geographical areas, possibly at national level, and repeated in time. Only in this way it is possible to solve the Gordian knot about the linkages between innovation, performance, high performance work practices and industrial relations.

Un’analisi statistico – economica dell’impatto delle norme WHO su nutrizione e salute

I comportamenti nutrizionali stanno assumendo sempre maggiore rilievo all’interno delle politiche comunitarie e questo sottolinea che la dieta sta avendo, negli ultimi anni, una maggiore importanza come fattore di causa e allo stesso tempo prevenzione nella diffusione di malattie croniche come il cancro, malattie cardiovascolari, diabete, osteoporosi e disturbi dentali. Numerosi studi mostrano infatti che i tassi di obesità sono triplicati nelle ultime due decadi e si è stimato che, se i livelli di obesità continueranno a crescere allo stesso tasso del 1990, nel 2010 il numero di persone obese raggiungerà i 150 milioni tra gli adulti e i 15 milioni tra bambini e adolescenti. I governi nazionali stanno quindi cercando di risolvere questo problema, a cui sono inoltre legati alti costi nazionali, tramite l’implementazione di politiche nutrizionali. Analisi di tipo cross-section sono già state evidenziate da studiosi come Schmidhuber e Traill (2006), i quali hanno effettuato un’analisi di convergenza a livello europeo per esaminare la distanza tra le calorie immesse da 426 prodotti diversi. In quest’analisi hanno così dimostrato la presenza di una similarità distinta e crescente tra i paesi europei per quanto riguarda la composizione della dieta. Srinivasan et al. invece hanno osservato la relazione esistente tra ogni singolo prodotto alimentare consumato e le norme nutrizionali dell’ Organizzazione Mondiale della Sanità (World Health Organization, WHO) Lo scopo di questa tesi è quello di evidenziare il problema a livello di aggregati nutritivi e di specifiche componenti nutrizionali come zucchero, frutta e verdura e non relativamente ad ogni singolo prodotto consumato. A questo proposito ci si è basati sulla costruzione di un indicatore (Recommendation Compliance Index) in modo da poter misurare le distanze tra la dieta media e le raccomandazioni del WHO. Lo scopo è quindi quello di riuscire a quantificare il fenomeno del peggioramento della dieta in diverse aree del mondo negli ultimi quattro decenni, tramite un’analisi panel, basandosi sui dati sui nutrienti consumati, provenienti dal database della FAO (e precisamente dal dataset Food Balance Sheets – FBS). Nella prima fase si introduce il problema dell’obesità e delle malattie croniche correlate, evidenziando dati statistici in diversi paesi europei e mondiali. Si sottolineano inoltre le diverse azioni dei governi e del WHO, tramite l’attuazione di campagne contro l’obesità e in favore di una vita più salutare e di una maggiore attività fisica. Nella seconda fase si è costruito un indicatore aggregato (Recommendation Compliance Index) in modo da analizzare le caratteristiche nella dieta dei diversi Paesi a livello mondiale rispetto alle norme del WHO. L’indicatore si basa sui dati ottenuti da FAOSTAT ed è calcolato per 149 paesi del database dell’FBS per il periodo 1961-2002. Nell’analisi si sono utilizzati i dati sulle percentuali di energia prodotta dalle varie componenti nutritive, quali grassi, grassi saturi e transaturi, zuccheri, carboidrati, proteine e le quantità di frutta e verdura consumate. Inoltre si è applicato un test statistico per testare se il valore del RCI è significativamente cambiato nel tempo, prendendo in considerazione gruppi di Paesi (Paesi OECD, Paesi in via di sviluppo e sottosviluppati). Si è voluto poi valutare la presenza o meno di un processo di convergenza, applicando l’analisi di σ-convergenza per osservare ad esempio se la variabilità è diminuita nel tempo in modo significativo. Infine si è applicato l’indicatore ad un livello micro, utilizzando il database del National Diet and Nutrition Survey, che raccoglie dati di macrocomponenti nutritive e misure antropometriche della popolazione inglese dai 16 ai 64 anni per il periodo 2000-2001. Si sono quindi effettuate analisi descrittive nonché analisi di correlazione, regressione lineare e ordinale per osservare le relazioni tra l’indicatore, i macronutrienti, il reddito e le misure antropometriche dell’ Indice di Massa Corporea (Body Mass Index, BMI) e del rapporto vita-fianchi (Waist-hip ratio, WHR).

Automatic Stabilizer Feature of Fixed Exchange Rate Regimes in Emerging Markets

This paper shows that countries characterized by a financial accelerator mechanism may reverse the usual finding of the literature -- flexible exchange rate regimes do a worse job of insulating open economies from external shocks. I obtain this result with a calibrated small open economy model that endogenizes foreign interest rates by linking them to the banking sector's foreign currency leverage. This relationship renders exchange rate policy more important compared to the usual exogeneity assumption. I find empirical support for this prediction using the Local Projections method. Finally, 2nd order approximation to the model finds larger welfare losses under flexible regimes.

Estado y cooperativismo eléctrico. El caso de la provincia de Córdoba, 1958-1966

En este artículo, que es parte de una investigación mayor dedicada al estudio del desarrollo eléctrico de la provincia de Córdoba entre 1958 y 1966(1), se analiza el papel jugado por el cooperativismo en el proceso de electrificación y los resultados de la política estatal de fomento de ese tipo de instituciones. La encargada de implementar esa política, por expresa delegación del Estado local, fue la Empresa Provincial de Energía de Córdoba (EPEC); es por ello que la misma, ocupa un lugar destacado en la instalación y desarrollo de estas entidades. En las fuentes consultadas, especialmente las memorias y balances de la organización pública, anteriormente nombrada, hemos encontrado información detallada sobre la ayuda financiera y los préstamos de equipos realizados a las cooperativas, tendientes a favorecer la expansión del servicio a las zonas rurales adyacentes a las localidades en las que estaban radicadas; como así también respecto del desarrollo de la infraestructura eléctrica provincial a través de la cual, las asociaciones distribuirían el fluido.

La problemática del agro en la perspectiva de Aldo Ferrer : Una reevaluación del discurso político de 'La Economía Argentina' y la práctica histórica durante la apertura nacionalista (1970-1971)

La actualidad que tienen los estudios historiográficos sobre las cuestiones del agro argentino en el siglo XX y el crecimiento de trabajos de investigación y de balances sobre dicha producción generan un contexto propicio para la reevaluación crítica de los aportes que se han hecho a la historia del agro argentino desde la perspectiva cepalina, mas específicamente aquella expresada en la amplia producción del economista Aldo Ferrer: su explicación de la problemática agraria desde el análisis de las debilidades internas del sistema productivo argentino y las falencias básicas del funcionamiento de la economía capitalista constituye un discurso en perspectiva histórica que manifiesta las representaciones identitarias que los sectores capitalistas nacionales tenían del agro argentino a fines de la década del sesenta. El análisis de su clásica obra La Economía Argentina (1963) permite argumentar que en su abordaje teórico y metodológico del desarrollo económico argentino la cuestión agraria ocupa el centro de los problemas que han aquejado al sistema productivo argentino durante todo el siglo XX y especialmente durante la etapa denominada de "apertura nacionalista" (1970-1971) en la cual el autor tuvo una activa participación política como Ministro de Economía de la Nación Argentina.

Estado y cooperativismo eléctrico. El caso de la provincia de Córdoba, 1958-1966

En este artículo, que es parte de una investigación mayor dedicada al estudio del desarrollo eléctrico de la provincia de Córdoba entre 1958 y 1966(1), se analiza el papel jugado por el cooperativismo en el proceso de electrificación y los resultados de la política estatal de fomento de ese tipo de instituciones. La encargada de implementar esa política, por expresa delegación del Estado local, fue la Empresa Provincial de Energía de Córdoba (EPEC); es por ello que la misma, ocupa un lugar destacado en la instalación y desarrollo de estas entidades. En las fuentes consultadas, especialmente las memorias y balances de la organización pública, anteriormente nombrada, hemos encontrado información detallada sobre la ayuda financiera y los préstamos de equipos realizados a las cooperativas, tendientes a favorecer la expansión del servicio a las zonas rurales adyacentes a las localidades en las que estaban radicadas; como así también respecto del desarrollo de la infraestructura eléctrica provincial a través de la cual, las asociaciones distribuirían el fluido.

La problemática del agro en la perspectiva de Aldo Ferrer : Una reevaluación del discurso político de 'La Economía Argentina' y la práctica histórica durante la apertura nacionalista (1970-1971)

La actualidad que tienen los estudios historiográficos sobre las cuestiones del agro argentino en el siglo XX y el crecimiento de trabajos de investigación y de balances sobre dicha producción generan un contexto propicio para la reevaluación crítica de los aportes que se han hecho a la historia del agro argentino desde la perspectiva cepalina, mas específicamente aquella expresada en la amplia producción del economista Aldo Ferrer: su explicación de la problemática agraria desde el análisis de las debilidades internas del sistema productivo argentino y las falencias básicas del funcionamiento de la economía capitalista constituye un discurso en perspectiva histórica que manifiesta las representaciones identitarias que los sectores capitalistas nacionales tenían del agro argentino a fines de la década del sesenta. El análisis de su clásica obra La Economía Argentina (1963) permite argumentar que en su abordaje teórico y metodológico del desarrollo económico argentino la cuestión agraria ocupa el centro de los problemas que han aquejado al sistema productivo argentino durante todo el siglo XX y especialmente durante la etapa denominada de "apertura nacionalista" (1970-1971) en la cual el autor tuvo una activa participación política como Ministro de Economía de la Nación Argentina.

Estado y cooperativismo eléctrico. El caso de la provincia de Córdoba, 1958-1966

En este artículo, que es parte de una investigación mayor dedicada al estudio del desarrollo eléctrico de la provincia de Córdoba entre 1958 y 1966(1), se analiza el papel jugado por el cooperativismo en el proceso de electrificación y los resultados de la política estatal de fomento de ese tipo de instituciones. La encargada de implementar esa política, por expresa delegación del Estado local, fue la Empresa Provincial de Energía de Córdoba (EPEC); es por ello que la misma, ocupa un lugar destacado en la instalación y desarrollo de estas entidades. En las fuentes consultadas, especialmente las memorias y balances de la organización pública, anteriormente nombrada, hemos encontrado información detallada sobre la ayuda financiera y los préstamos de equipos realizados a las cooperativas, tendientes a favorecer la expansión del servicio a las zonas rurales adyacentes a las localidades en las que estaban radicadas; como así también respecto del desarrollo de la infraestructura eléctrica provincial a través de la cual, las asociaciones distribuirían el fluido.

La problemática del agro en la perspectiva de Aldo Ferrer : Una reevaluación del discurso político de 'La Economía Argentina' y la práctica histórica durante la apertura nacionalista (1970-1971)

La actualidad que tienen los estudios historiográficos sobre las cuestiones del agro argentino en el siglo XX y el crecimiento de trabajos de investigación y de balances sobre dicha producción generan un contexto propicio para la reevaluación crítica de los aportes que se han hecho a la historia del agro argentino desde la perspectiva cepalina, mas específicamente aquella expresada en la amplia producción del economista Aldo Ferrer: su explicación de la problemática agraria desde el análisis de las debilidades internas del sistema productivo argentino y las falencias básicas del funcionamiento de la economía capitalista constituye un discurso en perspectiva histórica que manifiesta las representaciones identitarias que los sectores capitalistas nacionales tenían del agro argentino a fines de la década del sesenta. El análisis de su clásica obra La Economía Argentina (1963) permite argumentar que en su abordaje teórico y metodológico del desarrollo económico argentino la cuestión agraria ocupa el centro de los problemas que han aquejado al sistema productivo argentino durante todo el siglo XX y especialmente durante la etapa denominada de "apertura nacionalista" (1970-1971) en la cual el autor tuvo una activa participación política como Ministro de Economía de la Nación Argentina.

Avaliação de eficiência das cooperativas de crédito no Brasil: um estudo com base na intermediação financeira e na prestação de serviços

As cooperativas de crédito são instituições financeiras que têm como finalidade principal a prestação de serviços bancários e de intermediação financeira voltando-se para a geração de benefícios ao cooperado, através de benefícios econômicos encontrados sob a forma cooperativada. Considerando o objetivo destas organizações, o presente trabalho teve por objetivo avaliar a eficiência das mesmas considerando duas vertentes: 1) a atividade de intermediação financeira; e 2) a atividade de prestação de serviços bancários, a partir de variáveis contábeis. A técnica utilizada para a avaliação da eficiência foi a Análise Envoltória de Dados e foram analisados os determinantes da eficiência por meio de regressões do tipo Tobit. A amostra é composta por 315 cooperativas singulares listadas na base de dados do Banco Central do Brasil e foram utilizados os dados dos balancetes anuais e semestrais (soma dos semestres para as contas de resultado de cada ano) apresentados para período de 2007 a 2014. Os resultados indicaram baixa eficiência das cooperativas na prestação de serviços bancários, com 73% da amostra apresentando ineficiência ao longo de todos os anos do período em análise. Na atividade de intermediação financeira 20 cooperativas foram eficientes ao longo do período completo, com as demais apresentando graus de ineficiência abaixo de 16% em todos os anos. Quanto aos determinantes da eficiência, verificou-se como principais fatores na atividade de intermediação financeira a Imobilização, a Insolvência, o Descasamento Passivo e as Despesas Administrativas, enquanto na atividade de prestação de serviços os principais determinantes foram a Captação por Floating e as Despesas Administrativas. Os resultados da eficiência na intermediação financeira indicaram baixos graus de ineficiência, enquanto os altos graus de ineficiência na prestação de serviços bancários alertaram para a pouca importância dada ao fornecimentos destes serviços e para a importância de se utilizar dois modelos distintos para a avaliação da eficiência em cooperativas de crédito, dado o comportamento desvinculado entre as duas atividades avaliadas.

Banking Union with a Sovereign Virus. The self-serving regulatory treatment of sovereign debt in the euro area. CEPS Policy Brief No. 289, 27 March 2013

In many eurozone countries, domestic banks often hold more than 20% of domestic public debt, which is an unsatisfactory situation given that banks are highly leveraged and that sovereign debt is inherently subject to default risk within the euro area. This paper by Daniel Gros finds, however, that the relative concentration of public debt on bank balance sheets is not just a result of the euro crisis, for there are strong additional incentives for banks in some countries to increase their sovereign. His contribution discusses a number of these regulatory incentives – the most important of which is specific to the euro area – and explores ways in which euro area banks can be weaned from massive investments in government bonds.

Banking system soundness is the key to more SME financing. Bruegel Policy Contribution 2013/10, July 2013

The SME access-to-finance problem is not universal in the European Union and there are reasons for the fall in credit aggregates and higher SME lending rates in southern Europe. Possible market failures, high unemployment and externalities justify making greater and easier access to finance for SMEs a top priority. Previous European initiatives were able to support only a tiny fraction of Europe’s SMEs; merely stepping-up these programmes is unlikely to result in a breakthrough. Without repairing bank balance sheets and resuming economic growth, initiatives to help SMEs get access to finance will have limited success. The European Central Bank can foster bank recapitalisation by performing in the toughest possible way the asset quality review before it takes over the single supervisory role. Of the possible initiatives for fostering SME access to finance, a properly designed scheme for targeted central bank lending seems to be the best complement to the banking clean-up, but other options, such as increased European Investment Bank lending and the promotion of securitisation of SME loans, should also be explored.

Strong governments, weak banks. CEPS Policy Brief No. 305, 25 November 2013

Banks in the northern eurozone have capital ratios that are, on average, less than half of the capital ratios of banks in the eurozone’s periphery. The authors explain this by the fact that northern eurozone banks profit from the financial solidity of their governments and follow business strategies aimed at issuing too much subsidised debt. In doing so, they weaken their balance sheets and become more fragile – less able to withstand future shocks. Paradoxically, financially strong governments breed fragile banks. The opposite occurs in countries with financially weak governments. In these countries banks are forced to strengthen themselves because they are unable to rely on their governments. As a result they have significantly more capital and reserves than banks in the northern eurozone. Recommendations More than in the south, the governments of northern Europe should stand up and force the banks to issue more equity. This should go much further than what is foreseen in the Basel III accord. If the experience of the southern eurozone countries is any guide, banks in the north of the eurozone should at least double the capital and the reserves as a percentage of their balance sheets. Failure to do so risks destroying the financial solidity of the northern European governments when, in the future, negative shocks force these governments to come to the rescue of their undercapitalised banks. The new responsibilities entrusted to the European Central Bank as the single supervisor in the eurozone create a unique opportunity for that institution to change the regulatory and supervisory culture in the eurozone – one that has allowed the large banks to continue living dangerously, with insufficient capital.

Ending uncertainty: recapitalisation under European Central Bank supervision. Bruegel Policy Contribution 2013/18, 17 December 2013

Estimates of the recapitalisation needs of the euro-area banking system vary between €50 and €600 billion. The range shows the considerable uncertainty about the quality of banks’ balance sheets and about the parameters of the forthcoming European Central Bank stress tests, including the treatment of sovereign debt and systemic risk. Uncertainty also prevails about the rules and discretion that will applyto bank recapitalisation, bank restructuring and bank resolution in 2014 and beyond. The ECB should communicate the relevant parameters of its exercise early and in detail to give time to the private sector to find solutions. The ECB should establish itself as a tough supervisor and force non-viable banks into restructuring. This could lead to short-term financial volatility, but it should be weighed against the cost of a durably weak banking system and the credibility risk to the ECB. The ECB may need to provide large amounts of liquidity to the financial system. Governments should support the ECB, accept cross-border bank mergers and substantial creditor involvement under clear bail-in rules and should be prepared to recapitalise banks. Governments should agree on the eventual creation of a single resolution mechanism with efficient and fast decision-making procedures, and which can exercise discretion where necessary. A resolution fund, even when fully built-up, needs to have a common fiscal backstop to be credible.

Supervisory transparency in the European banking union. Bruegel Policy Contribution 2014/01, 3 January 2004

Bank supervisors should provide publicly accessible, timely and consistent data on the banks under their jurisdiction. Such transparency increases democratic accountability and leads to greater market efficiency. There is greater supervisory transparency in the United States compared to the member states of the European Union. The US supervisors publish data quarterly and update fairly detailed information on bank balance sheets within a week. By contrast, based on an attempt to locate similar data in every EU country, in only 11 member states is this data at least partially available from supervisors, and in no member state is the level of transparency as high as in the US. Current and planned European Union requirements on bank transparency are either insufficient or could be easily sidestepped by supervisors. A banking union in Europe needs to include requirements for greater supervisory transparency.