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Begin New Search Topic Debt Content Type Policy Brief Publishing Institution Centre for European Policy Studies (CEPS)

1. Was the ECB's Comprehensive Assessment up to standard?

Author:
Willem Pieter De Groen
Publication Date:
11-2014
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The Comprehensive Assessment conducted by the European Central Bank (ECB) representsa considerable step forward in enhancing transparency ineuro-area banks' balance sheets. The most notable progress since the previous European stress test has been the hamonisation of the definition of non-performing loans and other concepts as well as uncovering hidden losses, which resulted in a €34 billion aggregate capital-chargenet of tax. Despite this tightening,most banks were able to meet the 5.5% common equity tier 1 (CET1) threshold applied in the test, whichsuggests that the large majority of the euro-area banks have improvedtheir financial position sufficiently to no longer constrainthem in financing the economy.Our own estimation based on the detailed results, however,provide a more nuanced picture, with a large numberof the banks still highly leveraged and in many cases unable to meet the regulatory capital requirementsthat will be introduced in the coming years underthe adverse stress test scenario.
Topic:
Debt, Economics, International Trade and Finance, and Global Recession
Political Geography:
Europe

2. The Asset Quality Review and Capital Needs: Why re-capitalise banks with public money?

Author:
Daniel Gros
Publication Date:
12-2013
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
There are three aggregate numbers that describe the problem the Single Supervisory Mechanism (SSM) is inheriting: the 130 banks under its direct supervision hold assets worth 250% of the euro area's GDP, their capital is equivalent to only 4% of their assets' value and they have made zero profits, in the aggregate, over the last four years.
Topic:
Debt, Economics, Markets, Financial Crisis, and Reform
Political Geography:
Europe

3. Net Neutrality and Mandatory Network-Sharing: How to disconnect the continent

Author:
Andrea Renda
Publication Date:
12-2013
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
A lively debate emerged on the proposed "Connected Continent" legislative package presented by the European Commission in September 2013. The package contains a proposed rule on the 'open Internet', which was heavily discussed in European Parliament hearings in early December. This commentary argues that while the proposed rule is in principle balanced and appealing, it is utterly impractical due to the enormous uncertainty that its application would entail. At the same time, the rule is very far from what neutrality proponents have argued for almost a decade: rather than the place for internet freedom, it would transform the Web into a place requiring constant micro-management and tutoring of user behavior. Both arguments lead to the conclusion that the current proposal should be at once reformed and analysed under a more holistic lens. On the one hand, Europe should launch an ambitious project for the future, converged infrastructure by mobilising resources and reforming rules to encourage investment into ubiquitous, converged, 'always on' connectivity. On the other hand, enhanced legal certainty for broadband investment could justify a more neutrality-oriented approach to traffic management practices on the Internet. The author proposes a new approach to Internet regulation which, altogether, will lead to a more balanced and sustainable model for the future, without jeopardising user freedom.
Topic:
Debt, Economics, Monetary Policy, Infrastructure, and Financial Crisis
Political Geography:
Europe

4. Policy Lessons for Macroeconomic and Financial Crisis Management in the Southern and Eastern Mediterranean

Author:
Rym Ayadi and Willem Pieter De Groen
Publication Date:
12-2013
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The 2007-09 global financial crisis led to a virtual collapse in economic activity and increased financial volatility worldwide. For the developing countries, the main channel of transmission has been a drop in external transactions, such as trade, financial and capital flows, and remittances. The southern and eastern Mediterranean countries (SEMC) have also faced declining economic activity, although there seems to be considerable variation in the relative magnitudes and timing of the decline. Most of the economies in the Mediterranean basin have had delayed but longer-lasting consequences as a result of the crisis, driven mostly by their endemic trade and investment ties with the EU and the Gulf Cooperation Council (GCC) countries.
Topic:
Debt, Economics, Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe

5. Strong Governments, Weak Banks

Author:
Paul De Grauwe and Yuemei Ji
Publication Date:
11-2013
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
One of the more troublesome features of banks is that they still hold so little equity. In 2013 the capital and reserves of EU banks amounted to only 7.6% of total balance sheets. Well-run businesses outside the banking sector typically hold equity shares of 20%, 30% or more of their balances sheets. For good reasons; these well-run firms know that shocks can occur that could wipe out large parts of their balance sheets. Good business strategy thus leads these firms to hold sufficiently large buffers to avoid bankruptcy.
Topic:
Debt, Economics, and Monetary Policy
Political Geography:
Europe

6. The New European Framework for Managing Bank Crises

Author:
Stefano Micossi, Jacopo Carmassi, and Ginevra Bruzzone
Publication Date:
11-2013
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The European Commission proposal for a Regulation establishing a European Single Resolution Mechanism (SRM) for banks is now under consideration before the European Parliament and the Council. The main principles and tools applicable for resolving a failing bank are contained in the June 2012 Commission proposal for a Directive on bank recovery and resolution (BRR), aimed at harmonising crisis management and resolution tools in EU member states, which is also under consideration by the European legislators. Any discussion of the new system must therefore be based on both proposals.
Topic:
Debt, Economics, International Trade and Finance, Markets, Monetary Policy, and Reform
Political Geography:
Europe

7. Liquidity in times of crisis: Even the ESM needs it

Author:
Daniel Gros and Thomas Mayer
Publication Date:
03-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This paper argues that the new permanent European rescue fund, the European Stability Mechanism (ESM), should be provided with a liquidity backstop by having it registered as a bank – and be treated as such by the European Central Bank. If the crisis were to become acute again, the ESM would stand ready to intervene in secondary markets, potentially with almost unlimited amounts of funding. Access to central bank financing will be crucial in a future crisis, because in such a crisis risk aversion is likely to be extreme, and even the ESM might not be able to raise at very short notice the huge sums that might be required to prevent a breakdown of the financial system. Hundreds of billions of euro might be needed just to top up the programmes for Greece, Ireland and Portugal – and Spain and Italy may require more than a thousand billion euro. Sums of this order of magnitude cannot be raised quickly by a new institution. Simply increasing the headline size of the ESM might thus be of little use.
Topic:
Debt, Economics, Monetary Policy, and Financial Crisis
Political Geography:
Greece, Spain, Italy, Portugal, and Ireland

8. The Spanish Hangover

Author:
Daniel Gros and Cinzia Alcidi
Publication Date:
04-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Spain faces high unemployment and slow growth. This paper focuses on an important source of those problems, namely its housing market. While some adjustment has occurred since Spain's housing bubble burst in 2008, the authors find that house prices and construction need to decrease more to slow Spain's unsustainable accumulation of foreign debt.
Topic:
Debt, Economics, Markets, and Financial Crisis
Political Geography:
Europe and Spain

9. Implementing Basel III in Europe: Diagnosis and avenues for improvement

Author:
Rym Ayadi, Emrah Arbak, and Willem Pieter De Groen
Publication Date:
06-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Adopted by the European Commission in July 2011, the proposed Capital Requirements Directive and Regulation (CRD IV-CRR) translate into EU law the Basel III standards adopted by the Basel Committee for Banking Supervision (BCBS). Among other things, the proposal increases the quality and quantity of the minimum capital; introduces new rules on liquidity, leverage ratios, counter-cyclical buffers and systemically important financial institutions; and amends the definitions of counterparty credit risk and rules for the banking book. The rules complement the earlier amendments that strengthened the capital and disclosure requirements for the trading book and resecuritization instruments as well as requirements to ensure that remuneration policies do not lead to excessive risk-taking.
Topic:
Debt, Economics, Markets, and Financial Crisis
Political Geography:
Europe

10. An Agenda for the European Council: Feasible steps to bring the eurozone back from the precipice

Author:
Stefano Micossi
Publication Date:
06-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Once again the European Council will meet in an emergency session at the end of June, with the eurozone economy in recession and actually plummeting in its Southern periphery. Further doubts are also growing on the sustainability of sovereign debts due to the vicious spiral of deteriorating bank balance sheets, ballooning potential liabilities from banking rescues and widening spreads on government borrowings. The sovereign debt crisis in the periphery has now turned into a fully fledged banking crisis that threatens to spread from Greece to Spain and tomorrow, who knows, to Italy, France and even Germany itself.
Topic:
Debt, Economics, Regional Cooperation, Financial Crisis, and Governance
Political Geography:
Europe, Greece, France, Germany, Spain, and Italy