EU Framework for Safeguarding Financial Stability: Towards an Analytical Benchmark for Assessing its Effectiveness

25 Pages Posted: 26 Feb 2008

See all articles by Maria Nieto

Maria Nieto

Banco de España

Garry J. Schinasi

Independent Advisor, Global Financial Stability

Multiple version iconThere are 2 versions of this paper

Abstract

European finance is becoming increasingly cross-border, while the European architecture for safeguarding financial stability including decision-making processes for providing financial-stability public goods have remained decentralized with some explicit mechanisms for coordination across countries. Policy makers are aware of the limitations of the existing institutional setting, but opinions on how to proceed, including on burden sharing, are lining up along national and regional political lines with less attention paid to European needs. This paper applies the 'economics of alliances' to examine these European policy challenges. The paper establishes benchmarks for assessing the ability of Europe's existing institutional architecture to efficiently allocate resources to safeguard the EU financial system against systemic threats to stability, such as the insolvency of a pan European bank.

Keywords: Safeguarding EU financial stability, crisis resolution, burden sharing

JEL Classification: C7, F3, G15, G20, G38, H41

Suggested Citation

Nieto, Maria J. and Schinasi, Garry J., EU Framework for Safeguarding Financial Stability: Towards an Analytical Benchmark for Assessing its Effectiveness. Banco de España Occasional Paper No. 0801. Available at SSRN: https://ssrn.com/abstract=1097590

Maria J. Nieto (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Garry J. Schinasi

Independent Advisor, Global Financial Stability ( email )

Washington, 20008
+1-202-361-0958 (Phone)

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