IDEAS home Printed from https://ideas.repec.org/a/bla/jcmkts/v59y2021i6p1438-1457.html
   My bibliography  Save this article

The Rise and Stall of EU Macro‐Prudential Policy. An Empirical Analysis of Policy Conflicts over Financial Stability, Market Integration, and National Discretion

Author

Listed:
  • Bart Stellinga

Abstract

The 2007–09 financial crisis appeared to demonstrate the need for a strong, supranational EU macro‐prudential policy framework to prevent similar future disasters. The implemented framework, however, is neither. It is highly complex, involving many constraints on the use of macro‐prudential instruments. It is also one of the principal areas of national discretion in EU banking regulation. To explain this, I build on the ‘financial trilemma’ thesis which holds that there are inherent tensions between pursuing financial stability, financial integration and national financial policies. Supranationalizing macro‐prudential policy proved difficult due to a lack of consensus on how to measure systemic risks and because of the distributional consequences involved. This increased the tension between stability and integration, as national macro‐prudential policies could constrain cross‐border finance and they could be misused for competitiveness considerations. Key policy actors disagreed on which goals to prioritize, with bargaining leading to a convoluted policy framework.

Suggested Citation

  • Bart Stellinga, 2021. "The Rise and Stall of EU Macro‐Prudential Policy. An Empirical Analysis of Policy Conflicts over Financial Stability, Market Integration, and National Discretion," Journal of Common Market Studies, Wiley Blackwell, vol. 59(6), pages 1438-1457, November.
    • Handle: RePEc:bla:jcmkts:v:59:y:2021:i:6:p:1438-1457
    DOI: 10.1111/jcms.13195
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jcms.13195
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jcms.13195?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Emiliano Grossman & Patrick Leblond, 2011. "European Financial Integration: Finally the Great Leap Forward?," Journal of Common Market Studies, Wiley Blackwell, vol. 49(2), pages 413-435, March.
    2. Bart Stellinga & Daniel Mügge, 2017. "The regulator's conundrum. How market reflexivity limits fundamental financial reform," Review of International Political Economy, Taylor & Francis Journals, vol. 24(3), pages 393-423, May.
    3. Berthold Rittberger, 2014. "Integration without Representation? The European Parliament and the Reform of Economic Governance in the EU," Journal of Common Market Studies, Wiley Blackwell, vol. 52(6), pages 1174-1183, November.
    4. Lucia Quaglia & Aneta Spendzharova, 2017. "The Conundrum of Solving ‘Too Big to Fail’ in the European Union: Supranationalization at Different Speeds," Journal of Common Market Studies, Wiley Blackwell, vol. 55(5), pages 1110-1126, September.
    5. Stellinga, Bart, 2020. "The open-endedness of macroprudential policy. Endogenous risks as an obstacle to countercyclical financial regulation," Business and Politics, Cambridge University Press, vol. 22(1), pages 224-251, March.
    6. Zdenek Kudrna & Sonja Puntscher Riekmann, 2018. "Harmonizing national options and discretions in the EU banking regulation," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 21(2), pages 144-158, April.
    7. Olena Kostylenko & Helena Sofia Rodrigues & Delfim F. M. Torres, 2019. "The spread of a financial virus through Europe and beyond," Papers 1901.07241, arXiv.org.
    8. Schoenmaker, Dirk, 2011. "The financial trilemma," Economics Letters, Elsevier, vol. 111(1), pages 57-59, April.
    9. Martin Hellwig, 2019. "Banks, Politics and European Monetary Union," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2019_13, Max Planck Institute for Research on Collective Goods.
    10. Zdenek Kudrna & Sonja Puntscher Riekmann, 2018. "Harmonizing national options and discretions in the EU banking regulation," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 21(2), pages 144-158, April.
    11. Ilkka Kiema & Esa Jokivuolle, 2019. "Bank Stability and the European Deposit Insurance Scheme," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(HS), pages 113-142.
    12. Flaviana Palmisano & Vito Peragine & Federico Biagi, 2019. "Inequality of opportunity in tertiary education in Europe," JRC Research Reports JRC118543, Joint Research Centre.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pierpaolo Benigno & Paolo Canofari & Giovanni Bartolomeo & Marcello Messori, 2024. "The Spectre of Financial Dominance in the Eurozone," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 10(1), pages 59-80, March.
    2. Kouretas, Georgios P. & Papadopoulos, Athanasios P. & Tavlas, George S., 2022. "Financial risks, monetary policy in the QE era, and regulation," Journal of Financial Stability, Elsevier, vol. 63(C).
    3. Matthias Thiemann & Bart Stellinga, 2023. "Between technocracy and politics: How financial stability committees shape precautionary interventions in real estate markets," Regulation & Governance, John Wiley & Sons, vol. 17(2), pages 531-548, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eckert, Sandra, 2020. "EU agencies in banking and energy between institutional and policy centralisation," SAFE Working Paper Series 278, Leibniz Institute for Financial Research SAFE.
    2. Emilios Avgouleas & Douglas W. Arner & Uzma Ashraf, 2014. "Regional financial arrangements: lessons from the Eurozone crisis for East Asia," Chapters, in: Iwan J. Azis & Hyun S. Shin (ed.), Global Shock, Risks, and Asian Financial Reform, chapter 10, pages 377-415, Edward Elgar Publishing.
    3. Ravel Sami Jabbour, 2022. "The fragmentation of international banking regulation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4451-4471, October.
    4. Lindner, Vincent & Eckert, Sandra & Nölke, Andreas, 2022. "Political science research on the reasons for the (non) adoption and (non) implementation of EMU reform proposals: The state of the art," SAFE Working Paper Series 339, Leibniz Institute for Financial Research SAFE.
    5. Thierry Warin & Aleksandar Stojkov, 2021. "Banks’ Foreign Claims in the Aftermath of the 2008 Crisis: Institutional Response, Financial Efficiency, and Integration of Cross-Border Banking in the Euro Area," JRFM, MDPI, vol. 14(2), pages 1-17, February.
    6. Sasidaran Gopalan & Bhavya Gupta & Ramkishen S. Rajan, 2023. "Financial globalisation in ASEAN+3: Navigating the financial trilemma," Global Policy, London School of Economics and Political Science, vol. 14(3), pages 464-476, June.
    7. Nikitas Konstantinidis & Konstantinos Matakos & Hande Mutlu-Eren, 2019. "“Take back control”? The effects of supranational integration on party-system polarization," The Review of International Organizations, Springer, vol. 14(2), pages 297-333, June.
    8. Dragos G. TURLIUC & Andreea N. POPOVICI, 2013. "TOWARDS THE EUROPEAN BANKING UNION-Literature review," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 1, pages 221-229, June.
    9. Jorg Bibow, 2015. "The Euro's Savior? Assessing the ECB's Crisis Management Performance and Potential for Crisis Resolution," Economics Working Paper Archive wp_845, Levy Economics Institute.
    10. Vik, Jostein, 2020. "The agricultural policy trilemma: On the wicked nature of agricultural policy making," Land Use Policy, Elsevier, vol. 99(C).
    11. Vinokurov, Evgeny, 2017. "Regional financial integration in ASEAN in the comparative perspective," MPRA Paper 83022, University Library of Munich, Germany.
    12. Steiner, Andreas & Steinkamp, Sven & Westermann, Frank, 2019. "Exit strategies, capital flight and speculative attacks: Europe's version of the trilemma," European Journal of Political Economy, Elsevier, vol. 59(C), pages 83-96.
    13. Tóth, József, 2015. "The Financial Background of the European Deposit Guarantee Schemes and the Resolution Mechanism," MPRA Paper 64794, University Library of Munich, Germany.
    14. De Grauwe, Paul & Foresti, Pasquale, 2016. "Fiscal rules, financial stability and optimal currency areas," Economics Letters, Elsevier, vol. 145(C), pages 278-281.
    15. Agnieszka Trzcinska, 2015. "The Impact of the New Resolution Regime on Public Support to Banks (Udzial sektora publicznego w kosztach ratowania bankow w swietle nowych przepisow w zakresie restrukturyzacji i uporzadkowanej likwi," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 13(55), pages 120-133.
    16. Marta Gómez-Puig & Simón Sosvilla-Rivero, 2024. "The diabolic loop between sovereign and banking risk in the euro area," IREA Working Papers 202406, University of Barcelona, Research Institute of Applied Economics, revised Feb 2024.
    17. Michael Abendschein & Harry Gölz, 2021. "International cooperation on financial market regulation," International Economics and Economic Policy, Springer, vol. 18(4), pages 787-824, October.
    18. Clément Fontan Fontan & Emmanuel Carré & Guillaume L'Oeillet, 2018. "Theoretical perspectives on the new era of central banking," Post-Print halshs-01866838, HAL.
    19. Ewa Miklaszewska & Katarzyna Mikołajczyk & Małgorzata Pawłowska, 2013. "Post-crisis Regulatory Architecture and Central and East European Banks," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 7-8, pages 63-85.
    20. Marie‐Hélène Gagnon & Céline Gimet, 2023. "One size may not fit all: Financial fragmentation and European monetary policies," Review of International Economics, Wiley Blackwell, vol. 31(1), pages 305-340, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jcmkts:v:59:y:2021:i:6:p:1438-1457. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0021-9886 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.