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Doom Loop or Incomplete Union? Sovereign and Banking Risk

Author

Listed:
  • Giorgio Barba Navaretti

    (University of Milan and LdA)

  • Giacomo Calzolari

    (European University Institute, CEPR and LdA)

  • José Manuel Mansilla-Fernández

    (Universidad Pùblica de Navarra and LdA)

  • Alberto Franco Pozzolo

    (University of Molise and LdA)

Abstract

This chapter discusses the foremost regulatory advances and policy proposals for the so-called "doom loop", i.e. the perverse and destabilizing interconnections between sovereigns' and banks liabilities. We discuss how the merits of the proposed regulatory reforms are strictly intertwined with the mechanisms of risk sharing being built up and implemented within the Baking Union, and more broadly within the Eurozone. We argue that it is very unlikely that there might be viable solutions to the regulatory treatment of Sovereign exposures without a strenghtening of risk-sharing mechanisms.

Suggested Citation

  • Giorgio Barba Navaretti & Giacomo Calzolari & José Manuel Mansilla-Fernández & Alberto Franco Pozzolo, 2019. "Doom Loop or Incomplete Union? Sovereign and Banking Risk," Development Working Papers 448, Centro Studi Luca d'Agliano, University of Milano.
    • Handle: RePEc:csl:devewp:448
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