Banking union in Europe: How much centralisation is needed?

  • We examine the efficiency of banking regulation in a federation with two tiers of government and highly integrated banking systems. We assume that policy makers have incomplete information about banks’ true health, and banking sector turmoil can generate cross-border spill-over effects. We show that, in such an environment, the decentralisation of policy responsibilities for the regulation of banks can achieve the first-best allocation and ensure financial stability. While national governments design banking regulations, the federal policy maker authorises inter-regional income redistribution payments throughout the federation. Our results suggest that strengthening national responsibilities in banking regulation and supervision in the course of the further development of the European banking union may be advisable.

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Metadaten
Author: Wolfram BergerORCiD, Yoko Nagase
DOI:https://doi.org/10.1111/boer.12126
ISSN:1467-8586
ISSN:0307-3378
Title of the source (English):Bulletin of Economic Research
Document Type:Scientific journal article peer-reviewed
Language:English
Year of publication:2018
Volume/Year:70
Issue number:1
Number of pages:E50
First Page:E67
Faculty/Chair:Fakultät 5 Wirtschaft, Recht und Gesellschaft / FG VWL, insbesondere Makroökonomik
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