5 ms·

In the US maybe, but Europe seems to be deeply afraid of the idea alone to dispose of a failed bank.

by pintxo 4y ago

Animats 4y ago
The Economist has pointed that out. Few countries in Europe seem to be set up to do this.
- bobthepanda 4y ago
  This is because the EU wants to have a common market but refuses to have a common deposit insurance scheme like the US FDIC, so now they've developed continent-scaled banks without a continent-scaled way to save them. A bunch of the euro crisis government bailouts happened because governments went underwater trying to save their banks.
  - ggm 4y ago
    And also because governments lied about their eligibility to be on the euro gravy train, and other governments were happy to lend them the money for future gain.
  - closewith 4y ago
    My(uninformed)impression is that the Directive on deposit guarantee schemes is the rough equivalent of the FDIC in the EU. Is there a serious deficiency in the protections that it offers?
    - bobthepanda 4y ago
      The deposit schemes are national and required to cover the branches of their banks in other countries. Pair a big enough bank with a small enough country and you can easily drown the small country. —- There’s also a credibility problem. When the US stress tested its banks, the ones that passed did not fail. When the EU did it, some of the passing banks ended up needing saving, and this happened multiple times, sometimes even with the same bank.
  - dmurray 4y ago
    Europe does not have continent-scale banks. It has a few players who dabble their toes in multiple countries. From a quick investigation I can't see any bank that operates branches in all three of the largest countries (France, Germany and Italy), never mind all 27 member states. And those that do operate in many countries (HSBC must have the most) can have their local subsidiaries insured by the appropriate countries, just as they are insured by the FDIC when they open branches and take deposits in the US.
    - bobthepanda 4y ago
      Cross border activity was much higher pre-euro crisis. Cross-border interbank lending is down 40%. https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2130.en.pdf https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2130.en.pdf

In the US maybe, but Europe seems to be deeply afraid of the idea alone to dispose of a failed bank.

by pintxo 4y ago

In the US maybe, but Europe seems to be deeply afraid of the idea alone to dispose of a failed bank.

Animats 4y ago

The Economist has pointed that out. Few countries in Europe seem to be set up to do this.

bobthepanda 4y ago
This is because the EU wants to have a common market but refuses to have a common deposit insurance scheme like the US FDIC, so now they've developed continent-scaled banks without a continent-scaled way to save them. A bunch of the euro crisis government bailouts happened because governments went underwater trying to save their banks.
- ggm 4y ago
  And also because governments lied about their eligibility to be on the euro gravy train, and other governments were happy to lend them the money for future gain.
- closewith 4y ago
  My(uninformed)impression is that the Directive on deposit guarantee schemes is the rough equivalent of the FDIC in the EU. Is there a serious deficiency in the protections that it offers?
  - bobthepanda 4y ago
    The deposit schemes are national and required to cover the branches of their banks in other countries. Pair a big enough bank with a small enough country and you can easily drown the small country. —- There’s also a credibility problem. When the US stress tested its banks, the ones that passed did not fail. When the EU did it, some of the passing banks ended up needing saving, and this happened multiple times, sometimes even with the same bank.
- dmurray 4y ago
  Europe does not have continent-scale banks. It has a few players who dabble their toes in multiple countries. From a quick investigation I can't see any bank that operates branches in all three of the largest countries (France, Germany and Italy), never mind all 27 member states. And those that do operate in many countries (HSBC must have the most) can have their local subsidiaries insured by the appropriate countries, just as they are insured by the FDIC when they open branches and take deposits in the US.
  - bobthepanda 4y ago
    Cross border activity was much higher pre-euro crisis. Cross-border interbank lending is down 40%. https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2130.en.pdf https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2130.en.pdf