Some Rules for Cross-Border Banks in Europe

Abstract

This article considers the nature of the rules that would need to exist to enable a satisfactory regulatory regime for cross-border banks in Europe in the light of the present crisis. It sets out first what would need to apply in normal circumstances when banks are sound before going to consider how earlier coordinated intervention and ultimately resolution before capital is eroded can be achieved. It suggests in particular that harmonising the detail of regulatory systems would be very time-consuming but not strike at the heart of the problem which is how countries can cooperate across legal boundaries and the structure that banks would need to have to make this feasible. It concludes by exploring the institutional structures that might make this possible, suggesting that if any new European level body is needed, the most important would be a resolution agency as demonstrated by US experience.