Monday, September 26, 2011

Banks and States

Nicolas Véron argues that European banks must sever their ties with individual states and be placed under a transnational European Banking Authority with "supervisory and resolution authority." In other words, the EU should regulate banks, insure deposits, and be empowered to shut down undercapitalized banks and wipe out their shareholders. He argues that it has become clear that one of the routes by which fiscal instability in one country spreads to other parts of the Eurozone is via the "banking channel." (h/t Martha Zuber)

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