Coordination of banking supervision in the European Union

Miroslav K. Nedelchev

Abstract


Banking supervision, which is important for the stability of the banking system and the effective organization of lending to business entities, is complicated and acquires new functions due to the fact that banking groups have begun to actively carry out cross-border activities. The current restructuring of the banking sector in the EU represents a fundamentally new stage of financial integration, which includes the delegation of authority and the granting of sovereign rights to national governments to achieve pan-European values.Individual EU member states have already taken their own steps to mitigate and overcome negative consequences of the global financial and economic crisis, most often related to the provision of government loans and government guarantees. In some cases, positive results were achieved, in particular, thanks to the measures, taken by the banking group itself (when thesubsidiary bank is the key element for the group's survival), as well as the measures, taken by several countries (when the parent bank and its foreign subsidiary banks are of system importance for several countries). However, in general, the achieved results are still unsatisfactory, which raises the question of the need to strengthen the coordination of national and supranational policies in this area.To this end, the paper explores the dynamics of the role and instruments of banking supervision for coordinating national policies of the EU member states. The analysis shows that in a number of cases efforts, aimed at eliminating the consequences of the global financial and economic crisis, have led to undesirable side effects for the economies of other countries. The measures, taken to save cross-border banks, underlie the new realities in the field of coordination of banking supervision policies.The results of the research showed, that the main goal of improving supervision coordination is to reduce the side effects of bank rehabilitation measures. A new culture of supervision is designed to reduce costs for taxpayers and the likelihood of a new crisis. It is expected, that now the banking system will better perform its functions to stimulate the development of new industry and ensure sustainable economic growth in the long term.

Keywords


banking system; banking supervision; coordination of banking supervision; restructuring; cross-border groups

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References


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DOI: https://doi.org/10.15407/econindustry2018.03.043

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