A Big Bang for Banking in Europe

Publication: Policy Letter No. 16
Topic Area: Financial Institutions
Authors: Jan Pieter Krahnen
Date: Dec 2013
Keywords: comprehensive assessment, banking supervision, euro area
Abstract:

This policy letter provides an overview of the strengths, weaknesses, risks and opportunities of the upcoming comprehensive risk assessment, a euro area-wide evaluation of bank balance sheets and business models. If carried out properly, the 2014 comprehensive assessment will lead the euro area into a new era of banking supervision. Policy makers in euro area countries are now under severe pressure to define a credible backstop framework for banks. This framework, as the author argues, needs to be a broad, quasi-European system of mutually reinforcing backstops.

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