The Centre for Banking Research at Cass Business School will host a Panel Discussion on Bank Resolution and the Mutualisation of Risk. Panellists will discuss key challenges in bank resolution and their impact on the overall financial system. The cornerstone of the post crisis resolution framework in the European Union and other advanced economies is that losses and costs of adjustments should be borne by private investors and creditors rather than by tax payers. How effective is the replacement of ‘bail-out’ for ‘bail-in’ as a resolution mechanism and what are the pros and cons of this framework? On this occasion, we will also launch the new issue of European Economy – Banks, Regulation and the Real Sector (issue 2016.2), which examines the recent institutional and academic debate on the post crisis reform of resolution regimes.
How to deal with the sovereign and banking risk loop is at the center of the policy and regulatory debate. There is a widespread awareness that excessive exposures of banks towards sovereigns and vice-versa may be a source of systemic risk, under-rated by the current regulation.
At the same time it is not clear how far limiting these exposures may in fact enhance or rather jeopardise global stability, especially given the still very slow pace of the recovery. There is also a widespread debate on the best policy measures to tackle this issue.
This event, organised to coincide with the launch of the IV issue of European Economy: Banks Regulation and the Real Sector will discuss the key ingredients of this debate and the main policy options.
This issue examines the design of the SSM, the major issues concerning its implementation, and the main future challenges ahead, with a special focus on how far the SSM is an effective enabler of cross border banking and the single European banking market.
Financing Small and Medium Enterprises (SMEs) is a fundamental ingredient of economic growth in Italy and worldwide. A rapid lending recovery is particularly important after several years of crisis and recession. From the point of view of lenders, information opacity and fragmentation hinder the matching of demand for and supply of credit.
Recovery and more favourable liquidity conditions after the QE partly lessened financial risk for SMEs as perceived in markets. At the same time, prudential rules tend to increase the cost of the supply of this kind of credit.
The Round Table, on the occasion of the presentation of the second issue of European Economy – Banks, Regulation, and the Real Sector devoted to “Who takes the risk for funding SMEs”, deals with the analysis of the equilibrium between demand for and supply of SMEs financing. We will address questions as the following. Should we envisage a more significant role for public administrations? Do we need structural rules to reduce prudential requirements facing the finance for SMEs? Should we increase non-bank financial channels such as stock markets? Is reinforcing relationship lending desirable despite scoring parameters?
The Single Supervisory Mechanism (SSM) is the first pillar of the European Banking Union. The third issue of European Economy – Banks, Regulation, and the Real Sector examines the design of the SSM, the major issues concerning its implementation, and the main future challenges ahead, focusing on how far the SSM is an effective enabler of cross border banking and the single European banking market.
Lending to the real economy is a fundamental ingredient to restore a sustainable growth path. Especially important is lending to Small Medium Enterprises (SMEs). This for two reasons. First because these firms account for a large share of GDP in all advanced and emerging economies; second, because SMEs are fairly risky subjects and Basel III and beyond Basel III regulatory requirements may hinder banks’ lending to them.
The second issue of European Economy – Banks Regulation and the Real Sector will be devoted to this theme, to whether it is still sustainable for banks to fund SMEs at market conditions. It will look at how far the supply of credit to SMEs involves unsustainable risk taking, given the current and perspective regulatory framework and, if so, whether this is a structural constrain, or, rather, just related to the post-crisis loads of non-performing loans. The issue will also consider whether financial tools could open new market based channels of funding for SMEs and the possible non-distortive role of public funds in supporting SMEs.