Preventing Europe’s Next Banking Crisis
As shockwaves from the America’s subprime disaster continue to reverberate, there is growing doubt about Europe’s ability to handle a financial crisis on a similar scale. Without a framework for more centralized supervision of a limited number of major international banks, the cost of a future cross-border crisis involving one of them is likely to be larger than Europe’s economy can afford.
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As shockwaves from America’s subprime disaster continue to reverberate, there is growing doubt about Europe’s ability to handle a financial crisis on a major scale. Severe lapses in bank regulation – in Germany, Britain, and perhaps France – have damaged the credibility of national systems of supervision. But this is only part of the problem. The European Union remains hopelessly ill-equipped to handle the crises that haven’t yet happened: cross-border crises sparked by EU banks’ increasing interdependence.