The new financial stability architecture in the EU

After the introduction of the euro in 1999, the debate on the financial stabilityarchitecture in the EU focused on the adequacy of a decentralised setting based onnational responsibilities for preventing and managing crises. The Financial ServicesAction Plan in 1999 and the introduction of the Lamfalussy process for financialregulation and supervision in 2001 enhanced the decentralised arrangements byincreasing significantly the level of legal harmonisation and supervisory cooperation. Inaddition, authorities adopted EU-wide MoUs to safeguard cross-border financialstability. In this context, the financial crisis has proved to be a major challenge to theongoing process of European financial integration. In particular, momentous eventssuch as the freezing of interbank markets, the loss of confidence in financial institutions,runs on banks and difficulties affecting cross-border financial groups, questioned theability of the EU financial stability architecture to contain threats to the integrated singlefinancial market. In particular, the crisis has demonstrated the importance...