The Challenges of the EU Banking Union - will it succeed in dealing with the next financial crisis? Bruges European Economic Policy Briefings 36/2015

The EU Banking Union combines micro- and macro-prudential regulation. It aims at breaking the “doom loop” between banks and sovereign debt, promoting financial stability and mitigating the next financial shock to the real EU economy, at the lowest possible cost to the financial institutions and to the taxpayers. Success, or failure, is determined by how the banking union copes with the challenges to its two main pillars, the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). Under the SSM, in its new supervisory role, the ECB may be subject to conflicts between the objectives of price and financial stability, and the single-supervisor role may be sub-optimal. Two regulators might have been preferable and more focus on ECB accountability will now be required. The shock-absorbing Single Resolution Fund (SRF), which is part of the SRM, may not have the capacity to deal with a crisis of the size of the one of 2008. Especially as the nature and severity of a future financial crisis cannot be forecasted. The design of the banking union is not the result of theoretical studies, but a political compromise to deal with an acute crisis. The theoretical studies that are included in this paper are not supportive of the banking union in its current form. Nevertheless, there is a good chance that the EU Banking Union may succeed, as ECB supervision of the 123 systemically important banks should contain potential demands on the SRM. In the event of a crisis that is too severe for the banking union to absorb with its current capability, the crucial assumption is that there is political will to rapidly provide new resources. The same applies, if a major financial crisis develops before the banking union is fully operational.

The Challenges of the EU Banking Union - will it succeed in dealing with the next financial crisis? Bruges European Economic Policy (BEEP) Briefings 36/2015

The EU Banking Union combines micro- and macro-prudential regulation. It aims at breaking the “doom loop” between banks and sovereign debt, promoting financial stability and mitigating the next financial shock to the real EU economy, at the lowest possible cost to the financial institutions and to the taxpayers. Success, or failure, is determined by how the banking union copes with the challenges to its two main pillars, the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). Under the SSM, in its new supervisory role, the ECB may be subject to conflicts between the objectives of price and financial stability, and the single-supervisor role may be sub-optimal. Two regulators might have been preferable and more focus on ECB accountability will now be required. The shock-absorbing Single Resolution Fund (SRF), which is part of the SRM, may not have the capacity to deal with a crisis of the size of the one of 2008. Especially as the nature and severity of a future financial crisis cannot be forecasted. The design of the banking union is not the result of theoretical studies, but a political compromise to deal with an acute crisis. The theoretical studies that are included in this paper are not supportive of the banking union in its current form. Nevertheless, there is a good chance that the EU Banking Union may succeed, as ECB supervision of the 123 systemically important banks should contain potential demands on the SRM. In the event of a crisis that is too severe for the banking union to absorb with its current capability, the crucial assumption is that there is political will to rapidly provide new resources. The same applies, if a major financial crisis develops before the banking union is fully operational.

Sedimentological, geochemical, micropaleontological and rock magnetic proxies of sediment core GeoB6211-2

Surface currents and sediment distribution of the SE South American upper continental margin are under influence of the South American Monsoon System (SAMS) and the Southern Westerly Wind Belt (SWWB). Both climatic systems determine the meridional position of the Subtropical Shelf Front (STSF) and probably also of the Brazil-Malvinas Confluence (BMC). We reconstruct the changing impact of the SAMS and the SWWB on sediment composition at the upper Rio Grande Cone off southern Brazil during the last 14 cal kyr combining sedimentological, geochemical, micropaleontological and rock magnetic proxies of marine sediment core GeoB 6211-2. Sharp reciprocal changes in ferri- and paramagnetic mineral content and prominent grain-size shifts give strong clues to systematic source changes and transport modes of these mostly terrigenous sediments. Our interpretations support the assumption that the SAMS over SE South America was weaker than today during most of the Late Glacial and entire Early Holocene, while the SWWB was contracted to more southern latitudes, resembling modern austral summer-like conditions. In consequence, the STSF and the BMC were driven to more southern positions than today's, favoring the deposition of Fe-rich but weakly magnetic La Plata River silts at the Rio Grande Cone. During the Mid Holocene, the northern boundary of the SWWB migrated northward, while the STSF reached its northernmost position of the last 14 cal kyr and the BMC most likely arrived at its modern position. This shift enabled the transport of Antarctic diatoms and more strongly magnetic Argentinean shelf sands to the Rio Grande Cone, while sediment contributions from the La Plata River became less important. During the Late Holocene, the modern El Niño Southern Oscillation set in and the SAMS and the austral tradewinds intensified, causing a southward shift of the STSF to its modern position. This reinforced a significant deposition of La Plata River silts at the Rio Grande Cone. These higher magnetic silts with intermediate Fe contents mirror the modern more humid terrestrial climatic conditions over SE South America.

O, C and Sr isotopic data for plankton and benthic foraminifera from DSDP Legs 26, 32, 36, and 71 sediments

A detailed d18O and d13C stratigraphy has been generated from analysis of well-preserved Albian - Early Maastrichtian foraminifera from Deep Sea Drilling Project (DSDP) Sites 511 and 327 (Falkland Plateau; ~58°S - 62°S paleolatitude) in the southern South Atlantic, and Cenomanian and Coniacian - Santonian foraminifera from DSDP Site 258 (Naturaliste Plateau; ~58°S paleolatitude) in the southern Indian Ocean. These results, when combined with previously published Maastrichtian stable isotope data from Ocean Drilling Program (ODP) Site 690 (Weddell Sea, ~65°S paleolatitude), provide new insight into the climatic and oceanographic history of the southern high latitudes during Middle-Late Cretaceous time. The planktonic foraminifer d18O curves reveal a gradual warming of surface waters from the Albian through the Cenomanian followed by extremely warm surface waters from the Turonian through the early Campanian. Long-term cooling of surface waters began in the late early Campanian and continued through the end of the Maastrichtian. The benthic foraminifer d18O record generally parallels changes in the oxygen isotopic curves defined by shallow-dwelling planktonic foraminifera. The vertical oxygen and carbon isotopic gradients were relatively low during the Albian - Cenomanian, high from the Turonian - Early Campanian, and then low during the late Campanian and Maastrichtian.