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Financial stability in the Eurozone: where do we stand?

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Abstract

At the start of the EMU, concerns about fiscal and monetary stability dominated the academic debate. In contrast, financial stability issues were largely overlooked. Since then, more attention has been paid to the implications of the EMU for financial regulation and supervision and to the drawbacks of government involvement in the domestic financial sector, both as owner and as debtor. This paper reassesses these issues and draws the following conclusions. Firstly, little progress has been made in centralizing financial supervision in the Eurozone. Secondly, with the exception of Germany, all Eurozone countries have made substantial progress in reducing state ownership in their banking systems. Thirdly, limited progress has been made in the reduction of bank exposures to domestic public debt. A continued retreat of governments from the financial sector is desirable, leaving bank ownership to the private sector, holdings of government debt to the public, and supervision to a specialized, independent European institution.

Suggested Citation

  • Arnold, Ivo J. M., 2007. "Financial stability in the Eurozone: where do we stand?," Journal of Financial Transformation, Capco Institute, vol. 19, pages 65-79.
    • Handle: RePEc:ris:jofitr:1401
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    Cited by:

    1. Arnold, Ivo J.M., 2012. "Sovereign debt exposures and banking risks in the current EU financial crisis," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 906-920.
    2. Aerdt Houben & Iskander Schrijvers & Tim Willems, 2008. "The Supervision of Banks in Europe: The Case for a Tailor-made Set-up," DNB Occasional Studies 604, Netherlands Central Bank, Research Department.

    More about this item

    Keywords

    European Monetary Union; fiscal and monetary stability; financial supervision;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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