Doom Loop or Incomplete Union? Sovereign and Banking Risk
22 Pages Posted: 14 Jan 2025
Date Written: March 11, 2019
Abstract
This chapter discusses the foremost regulatory advances and policy proposals for the so-called “doom loop”, i.e. the perverse and destabilizing interconnections between sovereigns’ and banks’ liabilities. We discuss how the merits of the proposed regulatory reforms are strictly intertwined with the mechanisms of risk sharing being built up and implemented within the Banking Union, and more broadly within the Eurozone. We argue that it is very unlikely that there might be viable solutions to the regulatory treatment of Sovereign exposures without a strengthening of risk-sharing mechanisms.
Suggested Citation: Suggested Citation
Barba Navaretti, Giorgio and Calzolari, Giacomo and Mansilla-Fernandez, José Manuel and Pozzolo, Alberto F., Doom Loop or Incomplete Union? Sovereign and Banking Risk (March 11, 2019). Centro Studi Luca d'Agliano Development Studies Working Paper No. 448, Available at SSRN: https://ssrn.com/abstract=5096651 or http://dx.doi.org/10.2139/ssrn.5096651
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