The recent financial crisis has forced a rethink of banking regulation and supervision and the role of financial innovation. This paper develops a model where prudent banks may signal their type through high capital ratios. Capital regulation may ensure separation in equilibrium, but deposit...

The European Central Bank's Outright Monetary Transactions (OMT) programme was a politically-pragmatic tool to diffuse the euro-area crisis. But it did not deal with the fundamental incompleteness of the European monetary union. As such, it blurred the boundary between monetary and fiscal...

The European Central Bank (ECB) is a special, even unique central bank. It is a central bank without a treasury by its side or a state behind it, just as the euro, Europe's common currency that the ECB is tasked with guarding, is a 'denationalised' currency. The euro area is a rare exception to...