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英国论文网:British and Dutch GDP:The spread of the cri(42)


But some of these banks are both too large to fail and too big to be rescued by a
single government. The EU should: (1) urgently pass legislation to cover banks
with significant cross-border presence and empower the ECB to provide direct support,
and (2) create an EU-level rescue fund managed by an existing institution
like the European Investment Bank.
Europe’s universal banks were supposed to be immune to the fallout from the subprime
crisis.
We now discover that any financial institution – universal bank or not – is vulnerable
if its leverage is high enough – as is the case for Europe’s largest banks. As
we pointed out 10 days ago, Europe’s banks are too big to fail but also too big to
be rescued by any single government. The unfolding of Fortis illustrates vividly
the weaknesses and hurdles of raising adequate defenses against a fully-fledged
banking crisis in the euro-area. This is an area where urgent EU action is needed.
In the case of Fortis, no European solution was possible. The ECB can only provide
liquidity against collateral to keep the money market functioning. It has no
powers to resolve a solvency crisis. In the absence of a European Treasury, such
operations can only be done by national authorities. But national authorities tend
to think nationally and are naturally reluctant to pay for the rescue of banks
abroad. In the case of Fortis it was relatively easy to cut the bank into three pieces,
but this would be more difficult with other large EU banking groups.
Foreign affiliates and banking crises
A key difficulty is that large European banks typically have subsidiaries – separate
legal entities – with separate balance sheets in every country where they operate.
However, asset and liability management is centralized. Cash and liquidity
reserves are also managed centrally and these assets may be ordered back to the
mother-company at times of stress. In such cases, subsidiaries receive paper which
can become worthless if the bank becomes insolvent.
Given this, burden sharing among national treasuries is controversial in cases
of bank failure. Disputes can delay timely decisions. Issues surrounding the equal
Crisis management tools for the
euro-area
Daniel Gros and Stefano Micossi
Centre for European Policy Studies; Assonime
61
treatment of creditors and depositors in the different countries can add layers of
complexity.
In the case of Fortis, the three governments – Belgian, Dutch and
Luxembourgish – choose to inject capital into the subsidiaries on their territory,
thus effectively creating 3 separte, state-owned banks. This is no doubt a harbinger
of the Balkan-isation of the EU banking system that might spread like a forest
fire unless decisive action is taken immediately.


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