Wednesday 27 February 2013

Banking, Winning And Losing

Again; this is another trawl of the net to evade or avoid the major stories of the day which are commanding attention elsewhere.  The purpose of this is just to remind us all of what else is out there and continuing

Some of it is could be significant if it tells us what others are up to and thinking and what could be in store in the near future.

We know that there are many and various serious problems in the European Banking System which are going to take time and endless trouble to resolve.  It may be that the markets or another complex event series might do if for us, but in ways we do not want or like.

In Brussels however, and among its many supporters, and placemen, the real answer to all these troubles lies with the EU who would embrace and control the European banking network.  One way of persuading those who might not agree is to persuade them that they will be among the winners.

See the article below by Dirk Schoenmaker and Arjen Siegmann in Vox, not a long piece, but again the Conclusion is quoted.


A truly integrated European banking system with supervision and resolution at the European level fosters the stability of the Economic and Monetary Union. Our analysis suggests that the non-Eurozone countries can also benefit from the stability of the banking union.

It is interesting to note that the main non-Eurozone countries that do not wish to join the banking union for political reasons (i.e. the UK and Sweden) would be the largest beneficiaries from the banking union.

Not joining is very costly on the budgetary front. It would be very demanding for the Swedish government to bear the full cost of a possible recapitalisation of Nordea outside the banking union, while only 20% of the benefits accrue to Sweden.

Similarly, the recapitalisation of some of the large UK banks during the great financial crisis put a severe strain on the UK government budget. The UK and Sweden thus preserve the expensive right to do potential rescues of their banks on their own. Political calculus dominates economic calculus.

Within the Eurozone, Spain (with two large banks) and the Netherlands (with three large banks) are the winners of the banking union. To reap these benefits, the second stage of resolution needs to be completed as well. So far, heads of state have focused on the first stage of supervision.


They make it sound so easy, all we need is “integration”, haven’t we heard that one before?

1 comment:

  1. "They make it sound so easy"

    They do and it isn't, because they still have to cope with deep-seated economic and cultural differences between north and south.