European Central Bank
Prospects for two-tiered banking regulation in Europe
The European Union’s complex and lengthy set of rules for banks is putting a burden on small lenders, which often form the backbone of a country’s banking sector. The solution, some propose, is to have a two-tiered system in which the banks that are “too big to fail” must follow the most stringent regulations, while simpler, less complicated rules apply to the smaller players. Such a system is already being used in the United States. Could Europe follow?
A choice for economies: Freedom or socialism
Some say the global economy is slowing down due to Brexit and the U.S.-China trade dispute – but these developments are not the real dangers. Far more insidious is the trend toward increased government influence in economies and large public debts. Yet, even many economists have adopted the notion that government intervention and high debt can be a good thing. These policies have been tried before and failed. Worse, they can end up limiting freedom.
2019 Global Outlook: Another year near zero
It has been a decade since global interest rates reached the zero lower bound, where monetary policymakers lose their ability to stimulate the economy using conventional policy tools. Among the largest global central banks, only the United States Federal Reserve has set its benchmark above 2 percent. Will this anomaly end in 2019?
A year of change for the European Union?
The European Union, which still lacks a post-Brexit vision of itself, will be changing the leadership of almost all its leading institutions over the next few months. Candidates are already jostling for position to take over at the European Commission and the European Central Bank, and surprises could be in store. With non-mainstream parties likely to gain seats in the May European Parliament elections, the EU-27 seems headed for even less harmony and more dissension.
‘Overbanking’ in Europe
While American banks recovered from the 2008 financial crisis, lenders in Europe have languished. Contrasting regulatory approaches and economic environments account for some of the differences, but European banking authorities have their own explanation: “overbanking.” Their reasoning is odd, not least because the European Union’s banking sector is shrinking.
The Italian challenge
Italy’s public finance troubles are making waves again, but the new government’s budget proposal does not spell disaster, nor should debt servicing create a big problem, considering today’s low interest rates. But Italy’s leaders have decided to transform their conflict with the European Union into a casus belli. Will the conflict end in an Italian crisis or a new EU architecture?
Orderly failure: The EU’s Bank Recovery and Resolution Directive
After the 2008-2009 financial crisis, governments are wary about bailing out distressed banks with taxpayer money. But the bail-in procedures implemented in 2016 by the European Union, while helping minimize some risks, have their own drawbacks. If new proposals are adopted to give resolution authorities more preemptive powers, they will give technocrats unprecedented control over the banking industry.
Opinion: Cryptocurrencies – fears and opportunities
After a few years of hype, experts are now tamping down expectations for cryptocurrencies. Indeed, several concerns about security and regulation need to be addressed. But cryptocurrencies – and the blockchain technology they are based on – also offer tremendous room for innovation and efficiency. By competing with traditional fiat currency, they could help profligate governments and central banks become more disciplined
The euro and the promise to end monetary profligacy
As the European Central Bank winds down its quantitative easing program, none of its future policy options look especially promising for the euro. While investors would welcome a more neutral monetary stance, that could spur political tensions in the euro area that could roil financial markets. Meanwhile, regulation is on the rise and growth could suffer, with unpleasant consequences for the single currency.
The false end of quantitative easing
In June, the European Central Bank made the fateful announcement that it would phase out its bond-buying program – called quantitative easing, or QE – by the end of this year. But putting an end to net bond purchases is not the same thing as ending the ECB’s ultra-lax monetary policy. By leaving the door open to rolling over its massive balance sheet of bonds as they mature, policymakers could keep oxygenating the euro area’s economy for years to come.