Introduction to the special issue: the persistent challenges to European Banking Union

in Journal of European Integration (2023), 45(1), 1-14

The papers of this special issue investigate the persistent challenges to European Banking Union and explore the tensions between broader financial stability objectives and national political and socio ... [more ▼]

The papers of this special issue investigate the persistent challenges to European Banking Union and explore the tensions between broader financial stability objectives and national political and socio-economic pressures through a diversity of lenses. In this introduction, we examine two main issues that need to be addressed in order to strengthen Banking Union: the incomplete institutional design of Banking Union and the difficulties encountered in applying the different elements of Banking Union to loosen sovereign-bank ties. These elements include the so-called ‘single’ rulebook, supervision, resolution, and financial mechanisms to support and resolve banks. [less ▲]

Bank Politics: Structural Reform in Comparative Perspective

Book published by Oxford University Press (2022)

The problem of banks being 'too big to fail' was the defining regulatory issue of the global financial crisis. However, attempts to tackle the problem by separating retail banking from higher risk trading ... [more ▼]

The problem of banks being 'too big to fail' was the defining regulatory issue of the global financial crisis. However, attempts to tackle the problem by separating retail banking from higher risk trading activities - known as structural reform - proved to be highly divisive and contributed to significant regulatory divergence. In this book, David Howarth and Scott James explain this variation by examining the politics of bank structural reform across six key jurisdictions: the United States, the European Union, the United Kingdom, France, Germany, and the Netherlands. Integrating political economy and public policy approaches, they develop a novel 'comparative financial power' framework to analyse how financial industry influence is mediated by two factors: first, whether bank lobbying is unified and centralized (cooperative financial power) or divided and fragmented (competitive financial power); and second, policy makers' use of venue shifting to depoliticize contentious policy issues. The book explains that the US and UK governments implemented major reforms because the banking industry was divided and faced significant opposition. However, venue shifting to an independent committee led to durable reform in the UK, while political polarization in the US contributed to contested reform. By contrast, the French and German governments balanced unified bank lobbying and political pressures to act by pursuing limited symbolic reforms; the Dutch government deflected the issue through delegation to multiple commissions (no reform); while political stalemate at the EU level resulted from early venue shifting and concerted pan-European bank lobbying. The book makes a major contribution to scholarship on the political economy of finance and business power. [less ▲]

The Increasingly Differentiated European Single Market?

in Leruth, Benjamin; Gänzle, Stefan; Trondal, Jarle (Eds.) The Routledge Handbook of Differentiation in the European Union (2022)

This contribution explores the range of differentiation in the EU Single Market and, specifically, differentiation created through the varying transposition and implementation of EU Single Market law and ... [more ▼]

This contribution explores the range of differentiation in the EU Single Market and, specifically, differentiation created through the varying transposition and implementation of EU Single Market law and policies and legally entrenched differentiation. Differentiation has in effect contributed to discrimination in the Single Market and has undermined market integration. Enlargement de facto increased soft and instrumental forms of differentiation. However, there is no correlation between the full transposition and implementation of EU legislation and policy and whether the member state is one of the older EU-15 or one of the newer EU-13. Moreover, it is clear from several legislative developments in the 2000s — including the directives on takeovers and energy production and supply, and the use of Enhanced Cooperation provisions on the Financial Transactions Tax (although not implemented) and the Unitary Patent — that the different preferences of the older member states — and notably German and French government preferences rooted in microeconomic interests — have driven legislated and, potentially permanent differentiation. [less ▲]

The European Guarantee Fund and COVID-19: Agile But in Need of Greater Accountability

E-print/Working paper (2022)

The European Guarantee Fund formed an important part of the EU’s first response to the COVID-19 pandemic. Despite delays from some member states and the European Commission over the creation of this ... [more ▼]

The European Guarantee Fund formed an important part of the EU’s first response to the COVID-19 pandemic. Despite delays from some member states and the European Commission over the creation of this instrument, the European Investment Bank (EIB) moved at high speed to support SMEs and mid-caps. The European Guarantee Fund was vertically accountable to national governments, but it needed stronger horizontal accountability to the European Parliament and diagonal accountability to NGOs. The EIB should commit to an independent ex-post evaluation of the European Guarantee Fund’s design, operation and impact. [less ▲]

Economic and Monetary Union at Twenty: A Stocktaking of a Tumultuous Second Decade

Book published by Routledge (2021)

The contributions to this book examine the two main asymmetries of the Euro Area as they have intensified during the second decade of Economic and Monetary Union (EMU): the first between monetary union ... [more ▼]

The contributions to this book examine the two main asymmetries of the Euro Area as they have intensified during the second decade of Economic and Monetary Union (EMU): the first between monetary union (more supranational governance) versus ‘economic’ union (less centralised governance); the second between those Euro Area member states of the so-called ‘core’ and those of the ‘periphery’. EMU stands as one of the European Union’s (EU) flagship integration achievements. Set up in 1999, with the large majority of EU member states at the time, EMU was described as ‘asymmetrical’ even prior to its start. From the outset, it involved asymmetrical integration in monetary and ‘economic’ union. Although a major element of the blueprint that paved the way for the final stage of EMU, the concept of ‘economic’ union was insufficiently developed. The second decade of the single currency gave rise to a second asymmetry, namely one between those Euro Area　member states of the ‘core’ and those of the ‘periphery’. The ten contributions to this volume speak to one or both of these asymmetries, covering the major political, political economy and policy dimensions of EMU and the ongoing debates about necessary policy and institutional reforms to overcome these asymmetries and bolster Euro Area stability. The outbreak of the Coronavirus (Covid-19) Crisis in 2020 created unprecedented socio-economic challenges for Euro Area member states, heightening the perceived urgency of reform. [less ▲]

Regional Development Banks in the World Economy

Book published by Oxford University Press (2021)

Regional development banks (RDB) have become increasingly important in the world economy, but have also been relatively under-researched to date. This timely volume addresses this lack of attention by ... [more ▼]

Regional development banks (RDB) have become increasingly important in the world economy, but have also been relatively under-researched to date. This timely volume addresses this lack of attention by providing a comprehensive, comparative, and empirically informed analysis of their origins, evolution, and contemporary role in the world economy through to the second decade of the twenty-first century. In Regional Development Banks in the World Economy, the editors provide an analytical framework that includes a revised categorisation of RDB by geographic operation and function. Part one offers detailed analyses of the origins, evolution, and contemporary role of the major RDB, including the Inter-American Development Bank, the African Development Bank, the Asian Development Bank, the European Investment Bank, the Central American Bank, the Andean Development Corporation, the European Bank for Reconstruction and Development, and the Asian Infrastructure Investment Bank. Part two offers comparative analyses of key topics on RDB, examining their initial design and their changing business models, their shifting role in promoting policies supported by the United States as hegemon and the private sector. The volume ends with a critical reflection on the role played by RDB to date and a strong defence of the need for these banks in an increasingly complex world economy. [less ▲]

Comment expliquer les reforms du secteur financier en Europe : acteurs, idées ou institutions

in Saurugger, Sabine; Hassenteufel, Patrick (Eds.) Les Politiques Publiques dans la Crise (2021)

This chapter presents an analysis of the public policies carried out in Europe to regulate the financial sector over the pas fifteen years, focusing notably on the role of financial sector and government ... [more ▼]

This chapter presents an analysis of the public policies carried out in Europe to regulate the financial sector over the pas fifteen years, focusing notably on the role of financial sector and government actors, while considering the role of ideas and institutional frameworks. The concern for financial sector stabilization and reinforced supervision in the aftermath of the crisis has led to the adoption of various European-level and national regulations. Competitive pressures within a highly internationalized sector, as well as the many possibilities for regulatory arbitrage, have justified the use of international and, at least, EU-level financial sector control mechanisms. This chapter demonstrates that the crises from which the EU suffered from 2007 led to a rupture in policies and power relations between public and private actors. The strengthening of supervision and supranational supervision is the direct consequence, and resulted in the creation of the three European authorities (EBA, EIOPA and ESMA), and above all the creation of the Single Supervisory Mechanism (SSM) and the transfer of supervisory powers over the euro zone's largest banks to the European Central Bank. The possibility of inadequate national supervision — a situation in which national public authorities ignore or accept the problems of national banks for various reasons — has thus been reduced. The effect of Basel III (international capital guidelines) is also felt on the activities and organization of large banks, encouraged to limit their high-risk activities. Most of the major European banks have reduced, or are in the process of reducing, their balance sheets. Yet to speak of a paradigm shift in the approach of the governments of major European countries, or even the European Commission, to financial regulation is premature. The constraints imposed on the financial sector, apart from the banks, have only partially increased. As a result of the Banking Union, the overall influence of banks has probably diminished at the national level, at least with regard to banking supervision. However, the ongoing weakness of bank regulation in many areas — for example, the weakness or absence of bank structural reform in all European countries with the exception of the United Kingdom — demonstrates ongoing bank influence. Moreover, other financial sector actors continue to be under-regulated and, arguably, insufficiently supervised. [less ▲]

Reforming the Institutions of Eurozone Governance

in Politics and Governance (2021), 9(2),

Failing forward in Economic and Monetary Union: explaining weak Eurozone financial support mechanisms

in Journal of European Public Policy (2021), 28(10), 1555-1572

In this article, we apply the ‘failing forward’ approach to analyse the negotiations on and design of reforms to Eurozone economic governance to tackle the Covid-19-related crisis of Economic and Monetary ... [more ▼]

In this article, we apply the ‘failing forward’ approach to analyse the negotiations on and design of reforms to Eurozone economic governance to tackle the Covid-19-related crisis of Economic and Monetary Union (EMU). This crisis highlights both spill-overs from major asymmetries in EMU and weaknesses in the incomplete economic governance of the Eurozone. We focus on the financial support mechanisms agreed upon after intergovernmental negotiations in major crisis situations. These reforms represent compromise solutions that reflect well-entrenched disagreements among member states. We explain why more far-reaching reforms to Eurozone economic governance – notably, the adoption of mutualized Euro-denominated debt and the generalized use of grants over loans – have not been adopted, despite the severity of the Covid-19-related crisis. These reforms – notably the Next Generation European Union (NGEU) financial package adopted in July 2020 – fail to address and, rather, contribute to existing asymmetries, thus sowing the seeds of future crises. [less ▲]

The role of the European Investment Bank in Times of COVID-19

in McDonald, D.A.; Marois, T.; Barrowclough, D.V. (Eds.) Public Banks and Covid-19: Combatting the Pandemic With Public Finance. Municipal Services Project (2020)

The European Guarantee Fund (EGF) is spearheading European Investment Bank (EIB) action in response to Covid-19. It will provide guarantees to the EIB and the EIF to reimburse any possible losses incurred ... [more ▼]

The European Guarantee Fund (EGF) is spearheading European Investment Bank (EIB) action in response to Covid-19. It will provide guarantees to the EIB and the EIF to reimburse any possible losses incurred in their operations. By pooling credit risk across all of the EIB’s members, the overall average cost of the EGF will be significantly reduced, compared to national schemes. Financially speaking, this appears an efficient solution given the objectives of a Regional Development Bank – which the EIB can be categorised. Most of the EGF funding will be made available through financial intermediaries – National Promotional Banks and commercial banks. Once the funds are made available and the list of financial intermediaries established, companies can file requests directly with financial intermediaries. We argue that especially in view of the public health crisis, it is high time for the EIB to establish a health sector strategy and step up its contribution from its own funds, beyond risk-sharing facilities with the Member States and the Commission as EGF and IDFF respectively. In its response to Covid-19 economic crisis, it is imperative for the EIB to focus squarely on the final beneficiaries (SMEs, innovation, social and environmental projects) rather than the private financial intermediaries. For the EU’s public bank, the need for assuring transparency and accountability, in view of the increasing use of budgetary and Member States’ funds especially in the public good health sector, is higher than ever. [less ▲]