The Single Market's Catch-22: Supervisory Centralisation in a Fragmented Banking Landscape

Financial Stability Conference - FSC Research Workshop 2018, Financial Risk and Stability Network, Berlin, November 1, 2018

19 Pages Posted: 7 Dec 2018

See all articles by Yuri Biondi

Yuri Biondi

French National Center for Scientific Research (CNRS)

Cecilia del Barrio

University of Trento, School of International Studies, Students; European Banking Institute

Date Written: November 1, 2018

Abstract

The key question that the present policy contribution addresses is whether increasingly centralised powers necessarily bring about better coordination and more financial integration. In fact, the post-crisis banking regulation scenario has been characterised by such centralisation efforts in the EU. From a regulatory viewpoint, this approach is epitomised by the Single Rulebook, whereas from an institutional one, this approach is characterised by the arrangements that shape the Banking Union, which comprise the Single Supervisory Mechanism (SSM), Single Resolution Mechanism (SRM), and the European Deposit Insurance Scheme (the much debated EDIS that is yet to be finalised).

In this context, supranational authorities (in the present analysis the SSM from a supervisory perspective, and the EBA from a regulatory one) advocate for an increasing centralisation of regulatory and supervisory practices across Member States in order to “reduce regulatory fragmentation and contribute to establishing a level playing field in the banking union”.

The present contribution, instead, draws upon the idea that uniformity is not a realistic and perhaps not even a suitable goal. Thus, supervisory and regulatory efforts across Europe should aim at fairly and satisfyingly strike a balance between integration and an unavoidable level of fragmentation, which stems from long-standing traditions and layered structures of national banking systems. Careful design and management of such a systematic balance between National and EU levels seems, therefore, a more feasible and realistic objective.

Our analysis focuses on the legal and institutional prudential frameworks, and their evolution before and after the crisis. This helps situating our contribution in the distinctive two time windows, namely between the Euro adoption and the global financial crisis (and its spill-over into the Member States debt crisis) and following the crisis. In particular, our analysis examines the large exposures case study, one of the crucial National Options and Discretions (NODs) granted to Member States by the CRR, which is claimed to be a key obstacle to achieving and smoothly applicating the Single Rulebook. Methodologically speaking, to comparatively analyse the variety of banking systems, especially the German, Italian, and French national case studies will be considered, complemented by descriptive statistics of the various banking systems and their evolution over the time windows. Specific attention will be paid to bank balance sheets, bank corporate organisation, micro- and macro-prudential regulation and supervision, taking into account the transfer of competences from the national to the supranational sphere that took place in the realm of prudential oversight.

Keywords: Single Supervisory Mechanism (SSM), Microprudential Regulation, National Options and Discretions, Diversity in the Banking Sector, Banking Regulation, Monetary Union, Banking Union, European Union

JEL Classification: E58, G28, E42, E61, F45

Suggested Citation

Biondi, Yuri and del Barrio, Cecilia, The Single Market's Catch-22: Supervisory Centralisation in a Fragmented Banking Landscape (November 1, 2018). Financial Stability Conference - FSC Research Workshop 2018, Financial Risk and Stability Network, Berlin, November 1, 2018. Available at SSRN: https://ssrn.com/abstract=3283829 or http://dx.doi.org/10.2139/ssrn.3283829

Yuri Biondi

French National Center for Scientific Research (CNRS) ( email )

IRISSO - University Paris Dauphine PSL
Place Marechal Lattre Tassigny
75016 Paris
France

HOME PAGE: http://yuri.biondi.free.fr/

Cecilia Del Barrio (Contact Author)

University of Trento, School of International Studies, Students ( email )

via Verdi 8/10
Trento, 38122
Italy

European Banking Institute ( email )

Frankfurt
Germany

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