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PPPs, development financing in Lusophone Countries
Autora: Mariana ABRANTES de Sousa
segunda-feira, setembro 24, 2012
The case for euro deposit insurance
GROS: The case for euro deposit insurance
Daniel Gros, Dirk Schoenmaker, 24 September 2012
As the EZ takes its first steps towards banking union, this column warns that such an approach – with banking supervision first and resolution and deposit insurance postponed to some undefined later stage – will lead to an unstable banking union. It adds that a strong European supervisor and a credible European resolution and deposit insurance authority should be introduced as part of the package.
...Recent IMF and World Bank studies find that the
'typical' fiscal cost of a crisis seems to be about 5% of GDP. If one accepts
this figure for the 'typical' fiscal cost of a crisis it follows that an EDIRA
endowed with a fund of €50 billion should be sufficient to handle a 'typical'
crisis for all smaller member countries (like Greece, Portugal or Ireland
today) and possibly even for Spain with a GDP of €1,000 billion. ..The debate about Banking Union is running into the
typical chicken-and-egg problem: Most academic observers agree that deposit
guarantee and resolution should be organised at the same level as supervision.
But at present only the creation of a ‘Single Supervisory Mechanism’ (SSM) to
be headed by the ECB is being discussed; with deposit insurance and resolution
to be considered only later when this SSM has shown its effectiveness.
We argue that the SSM is unlikely to be working well
unless a European Deposit Insurance and Resolution Agency is introduced
gradually at the same time.
The most important reason to start building the new Eurozone banking union with an European Deposit Insurance fund is to sharply reduce the risk to local depositors and thus to promote local savings and stabilize local bank funding, essential components of any solution to the Eurozone crisis. Only then, can we rely on the ECB to do a better job of prudential regulation and resolution of insolvent banks than the NCBs did over the last decade when they allowed banks to become overleveraged and overextended with huge "zero-weighed but subprime" cross-border lending. Without it, will the ECB really inspire more confidence as prudential regulator than the Bundesbank or the other NCBs? Mariana Abrantes de Sousa PPP Lusofonia