A Critical Evaluation of the Eu Single Supervisor Mechnism
The European Banking Union – Easing the Boom and Bust or overregulating an over regulated Industry
In light of the last 4 years and our own slip in status to Europe’s ‘Wilkins Micawber’ , there could be call for Ireland to support the kind of banking unification and responsibility sharing that the European Commissions proposed single supervisory mechanism. There could equally however be scepticism over allowing the institutions which have imposed our own austerity upon us to have greater regulatory control over our stagnant banking industry. In my opinion, at least at a micro (and somewhat economically patriotic level) I think that this system would ultimately benefit us in acting as a watchdog to an industry that has behaved more like its US counterparts than its European neighbours in recent years.
Having said all this I’d like to examine this issue at a macro level to discuss the benefits this new mechanism of the ECB could have for the EU as a whole in protecting its banking industry from the dangers of a boom and bust economy. To do this I’ll first lay out a background to the current crisis, as an indication of the problems this Union would try to fix, and then I will evaluate whether or not this proposal is the best means of solving the aforementioned problems. Finally we’ll look at how this proposal would shift the current regulatory landscape.
So first let’s look briefly at why we are where we are today. While we can look at the multitude of factors which met to create this perfect storm of financial chaos, for the purposes of this essay I think it’s best to draw from the conclusions of Carmassi et al i.e. That lax monetary policy and excessive leverage led to massive instability and liquidity problems that compounded the effect of a natural economic downturn.
What this says in effect is that, because banks became so overleveraged that when the economy took a natural downturn and house prices began to fall, the problem was exaggerated leading to
In light of the last 4 years and our own slip in status to Europe’s ‘Wilkins Micawber’ , there could be call for Ireland to support the kind of banking unification and responsibility sharing that the European Commissions proposed single supervisory mechanism. There could equally however be scepticism over allowing the institutions which have imposed our own austerity upon us to have greater regulatory control over our stagnant banking industry. In my opinion, at least at a micro (and somewhat economically patriotic level) I think that this system would ultimately benefit us in acting as a watchdog to an industry that has behaved more like its US counterparts than its European neighbours in recent years.
Having said all this I’d like to examine this issue at a macro level to discuss the benefits this new mechanism of the ECB could have for the EU as a whole in protecting its banking industry from the dangers of a boom and bust economy. To do this I’ll first lay out a background to the current crisis, as an indication of the problems this Union would try to fix, and then I will evaluate whether or not this proposal is the best means of solving the aforementioned problems. Finally we’ll look at how this proposal would shift the current regulatory landscape.
So first let’s look briefly at why we are where we are today. While we can look at the multitude of factors which met to create this perfect storm of financial chaos, for the purposes of this essay I think it’s best to draw from the conclusions of Carmassi et al i.e. That lax monetary policy and excessive leverage led to massive instability and liquidity problems that compounded the effect of a natural economic downturn.
What this says in effect is that, because banks became so overleveraged that when the economy took a natural downturn and house prices began to fall, the problem was exaggerated leading to
Bibliography: Markus Brunnermaier: Deciphering the Liquidity and Credit Crunch 2007-08 Carmassi, J., Gros, D., & Micossi, S.: The Global Financial Crisis: Causes and Cures (2009)47 Journal of Common Market Studies No Liars Poker – Michael Lewis (IBSN 10: 0340839961) -------------------------------------------------