2016年-PIIE彼得森国际经济研究所_A_Solution_for_Europes_Banking_Problem_9页_398kb

Summary of "A Solution for Europe's Banking Problem"

Core Content

This document outlines a comprehensive solution to Europe's banking crisis, emphasizing the need for a supranational triage and resolution mechanism to address the systemic fragility of the European banking sector. The authors, Adam S. Posen and Nicolas Véron, argue that the current fragmented approach to banking regulation and crisis management is inadequate, especially given the deep integration of European financial systems.

Main Points

1. The Banking Crisis in Europe

• The European banking system remains extremely fragile despite significant central bank interventions and government guarantees since 2008.
• Europe's economy is more reliant on bank credit than the US, with a higher proportion of household financial assets held in deposits and currency (34% in the EU, 27% in the UK, 37.5% in the euro area).
• Banks also represent a larger share of corporate value in Europe (24% of the aggregate market value of European listed companies in 2007), compared to 16% in the US.
• The magnitude of potential losses is huge, with estimates from the IMF and Goldman Sachs suggesting losses of up to €569 billion in European banks, and the decline in market value of European banks has been more pronounced than in US banks since the crisis began.

2. Why Triage is Necessary

• Systemic banking crises require system-wide assessment of banks' solidity and long-term viability to restore trust and differentiate between healthy and distressed institutions.
• A centralized triage process is essential to avoid political interference and ensure consistent, transparent evaluation of banks.
• Decentralized approaches are ineffective and risk systemic gaming, as national governments may act in self-interest to protect local banks.

3. Challenges in Current Policy Response

• Political reluctance to take tough measures persists, as governments prefer short-term bailouts over long-term restructuring.
• Market pressures are limited due to the presence of state guarantees and the lack of transparency in financial reporting.
• Existing institutions such as the European Commission and the European Investment Bank lack the capacity and mandate to effectively manage banking triage and resolution.

4. Proposed Solution: A Temporary European Bank "Treuhand"

• The authors propose the creation of a temporary supranational agency called the Treuhand (German for "trustee") to manage the triage and resolution of European banks.
• The Treuhand would have three main tasks:
  • Evaluate capital adequacy of major European banks using a consistent methodology.
  • Catalyze recapitalization or restructuring of weaker banks by triggering market pressure and coordinating burden-sharing among states.
  • Act as a trustee for assets and equity acquired by national governments during restructuring, ensuring transparent and efficient asset management.

5. Benefits of the Treuhand Approach

• The Treuhand would enhance coordination among European countries, reducing the risk of market fragmentation and economic distortion.
• It would avoid fiscal federalism by using a no-nonsense allocation formula (e.g., the ECB's capital key) to distribute costs.
• It would prevent moral hazard and ensure fair treatment of stakeholders, including foreign investors.
• It could sequence and synchronize asset sales, improving price discovery and market liquidity.

Key Information

• The Treuhand is not a permanent institution but a temporary agency with a five-year lifespan.
• The proposal does not require treaty changes or fiscal federalism, making it politically feasible.
• It is based on the experiences of the US RTC and Sweden’s BSA, which successfully managed banking crises through centralized, transparent mechanisms.
• The authors stress that delaying triage will only increase the economic cost and risk long-term instability.

Conclusion

• A centralized, transparent, and consistent triage process is essential to address Europe's banking crisis.
• The proposed Treuhand offers a practical and politically viable solution to restore trust, coordinate burden-sharing, and ensure fair resolution of banking failures.
• The banking crisis is a critical test for the EU, and the time to act is now to prevent a prolonged economic downturn and further financial instability.

References

• The authors cite a range of studies and reports, including those from the IMF, the European Central Bank, and other institutions, to support their arguments. These include:
  • Broadbent et al. (2009) on stress testing.
  • Eisenschmidt and Tapking (2009) on liquidity risk.
  • Freixas (2004) on crisis management.
  • Gropp and Kashyap (2009) on banking integration.
  • Hoshi and Kashyap (2008) on US bank recapitalization.
  • Laeven and Valencia (2008) on systemic banking crises.
  • Mikitani and Posen (2000) on the Japanese financial crisis.
  • Pisani-Ferry and van Pottelsberghe (2009) on post-crisis growth.
  • Posen (2009) on recovery.
  • Véron (2007) on Europe's preparedness for a banking crisis.