Adequacy of EU Level Banking and Supervisory Structures for Debt Crisis Response

Adequacy of EU Level Banking and Supervisory Structures for Debt Crisis Response

Author Note

Introduction

The financial crisis that happened during the years 2007 and 2008 has negatively influenced the economy of the European Union. This has more devastating effects on the United States in its market of mortgages in 2007, which came into light after the governing body named the Federal Home Loan Mortgage Corporation highlighted that it would have no purchasing transaction regarding high-risk mortgages (Ongena et al. 2019). Moreover, another institution, the country named New Century Financial Corporation, which is one of the leading lenders in the mortgage market, had become bankrupt (Lane, 2012). The year 2008 evidenced a substantial financial crisis with the increased financial incapability of some important financial institutions in the United States. Thus, it gave birth to substantial financial crises, such as the debt crisis, affecting major economies across the globe, including the European Union.

Different Reforms

The increasing crisis in the European Union required a complete review of the supervisions structure of its banks, along with its regulations. With the measures taken for this review, it can be adequately analyzed if those structures can be proved compatible with responding to the prevailing debt crisis (Jones et al. 2016). For responding to the issue, the Union tried to strengthen the coordination policy among its members. This made the adoption of “six-pack” in 2011, which is based on the facts of economic governance so that it can strengthen the areas of its fiscal policies. Another package named “two-pack” was introduced in 2013 for developing the budgetary coordination of the union along with improving the economic and financial reforms (Kudrna, 2012).

One of the critical indicators of the financial crisis in the region was the broken functions of its financial sectors. It made the introduction of new authorities associated with the financial sector, who can supervise these institutions and initiate the progress of the banking activities in its market (Hallerberg & Markgraf, 2018). The authorities pledged towards the growth of the union through improving the banking situations along with removing the fragmentations identified in the financial markets, which hinder different monetary policies and banking lending procedures (De Bruyckere et al. 2013). Such reforms also required the adoption of adequate economic stability for improving the growth of the financial sector, along with its development. For this, the EU adopted a strategy named “Europa 2020 Strategy” for boosting sustainable growth and smarter activities of the sector (Carbó-Valverde et al. 2016). Such an introduction initiated the growth of the employment, thus intending it to make it more competitive as compared to its neighbouring countries.

Conclusion

The reforming activities that have been undertaken by the European Union indicate that it has tried its best so that they can be proved adequate for responding to the prevailing debt crisis in the member countries. Moreover, it has been one of the goals of the union to undertake more associated measures for addressing the debt crisis so that it may not occur in the future again. The new inclusion of strategies and government structures has been working continuously for bringing improvements, which are expected to heighten the economic as well as the fiscal policies of its member states (Basten & Serrano, 2019). With this, it has also pledged to increase employment, which will be monitored by the European Commission, thus having future growth of the nation based on its current performance.

Reference List

Basten, M., & Serrano, A. S. (2019). European banks after the global financial crisis: a new landscape. Journal of Banking Regulation, 20(1), 51-73.

Carbó-Valverde, S., Benink, H. A., Berglund, T., & Wihlborg, C. (2016). Regulatory response to the financial crisis in Europe: Recent developments (2010–2013). In The First Great Financial Crisis of the 21st Century: A Retrospective (pp. 167-218).

De Bruyckere, V., Gerhardt, M., Schepens, G., & Vander Vennet, R. (2013). Bank/sovereign risk spillovers in the European debt crisis. Journal of Banking & Finance, 37(12), 4793-4809.

Hallerberg, M., & Markgraf, J. (2018). The Corporate Governance of Public Banks before and after the Global Financial Crisis. Global Policy, 9, 43-53.

Jones, E., Kelemen, R. D., & Meunier, S. (2016). Failing forward? The Euro crisis and the incomplete nature of European integration. Comparative Political Studies, 49(7), 1010-1034.

Kudrna, Z. (2012). Cross‐Border resolution of failed banks in the European Union after the crisis: Business as usual. JCMS: Journal of Common Market Studies, 50(2), 283-299.

Lane, P. R. (2012). The European sovereign debt crisis. Journal of Economic Perspectives, 26(3), 49-68.

Ongena, S., Popov, A., & Van Horen, N. (2019). The invisible hand of the government: Moral suasion during the European sovereign debt crisis. American Economic Journal: Macroeconomics, 11(4), 346-79.