Lecture on Internal Market Financial Services (part II)

Question 1

When was the start of the EMU?

Answer 1

1999

Question 2

What is the EMU?

Answer 2

The EMU, or Economic and Monetary Union, is a framework for economic integration between member states of the European Union. It involves the coordination of economic and fiscal policies, a common monetary policy, and a common currency, the euro.

Question 3

What are some of the causes of the financial crisis?

Answer 3

Monetary policy providing cheap liquidity, lack of well regulated markets for securitized mortgages

Question 4

What does the financial crisis clearly demonstrates?

Answer 4

The fragility of bank balance sheets and inadequacy of bank capital levels

Question 5

What are examples of the European banking union?

Answer 5

Single Supervisory Mechanism (SSM)
Single Resolution Mechanism (SRM)
Deposit Guarantee Schemes (DGS)

Question 6

What were ways for restoring the confidence in the banking system after the crisis?

Answer 6

• Substantial increase of bank capital requirements (Basel 3)
• Bail-in debt and market discipline
• Ringfencing of bank activities
• European banking union
• Delinking the vicious loop between banking and sovereign problems

Question 7

What did vickers (2011) talk about?

Answer 7

Ringfencing of retail banking activities

Question 8

What did Liikanen (2012) talk about?

Answer 8

Ringfencing or trading activities

Question 9

What did Basel 3 and CRR/CRD 4 talk about?

Answer 9

Higher capital and liquidity requirements

Question 10

What is an example of the single supervisory mechanism (SSM)?

Answer 10

ECB started acting as supervisor for banks with assets of more than 30 billion euro in late 2014

ECB was granted overall supervisory responsibility for banks in the euro area including the power to require banks to take remedial action

Active involvement of national supervisors within the SSM

Question 11

What was included in the Bank Recovery and Resolution Directive (BRRD)?

Answer 11

Bail-in debt mechanism and a requirement to draw up living wills

BRRD establishes harmonized procedures for restructuring problem banks

Question 12

What does the SRM do?

Answer 12

SRM supplements BRRD and establishes the Single Resolution Board, ensuring a coherent and uniform approach to the operation of the resolution rules across Europe as from 2015

Question 13

What is DGS?

Answer 13

Deposit Guarantee Scheme

Rely upon existing networks of national DGS