Doom Loop or Incomplete Union? Sovereign and Banking Risk

22 Pages Posted: 14 Jan 2025

See all articles by Giorgio Barba Navaretti

Giorgio Barba Navaretti

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM); Centro Studi Luca d'Agliano (LdA)

Giacomo Calzolari

European University Institute - Economics Department (ECO); Centre for Economic Policy Research (CEPR); University of Bologna

José Manuel Mansilla-Fernandez

Public University of Navarre

Alberto F. Pozzolo

Roma Tre University

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

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

Giorgio Barba Navaretti (Contact Author)

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy
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Centro Studi Luca d'Agliano (LdA) ( email )

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Italy
+39 02 36683850 (Phone)

Giacomo Calzolari

European University Institute - Economics Department (ECO) ( email )

Villa la Fonte
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Bologna ( email )

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I-40126 Bologna
Italy

HOME PAGE: http://sites.google.com/view/giacomo-calzolari

José Manuel Mansilla-Fernandez

Public University of Navarre ( email )

Business Administration Department
Campus Arrosadia
Pamplona, Pamplona 31006
Spain

HOME PAGE: http://sites.google.com/site/josemanuelmansillafernandezphd/home

Alberto F. Pozzolo

Roma Tre University ( email )

Via Ostiense 163
Roma, RM 00154
Italy

HOME PAGE: http://www.uniroma3.it/

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