This paper exploits the federal preemption of national banks in 2004 from local laws against predatory lending to gauge the effect of the supply of credit on the real economy. First, the preemption regulation resulted in an 11% increase in annual lending in the 2004-2006 period, which is...

Has economic research been helpful in dealing with the financial crises of the early 2000s? On the whole, the answer is negative, although there are bright spots. Economists have largely failed to predict both crises, largely because most of them were not analytically equipped to understand...

This paper distils three lessons for bank regulation from the experience of the 2009-12 euro-area financial crisis. First, it highlights the key role that sovereign debt exposures of banks have played in the feedback loop between bank and fiscal distress, and inquires how the regulation of...

Europe’s financial structure has become strongly bank-based – far more so than in other economies. We document that an increase in the size of the banking system relative to equity and private bond markets is associated with more systemic risk and lower economic growth, particularly during...

A European banking union is necessary to ensure the stability of the European financial system. This paper assesses the EU Commission's proposals for legislation to create a banking union in Europe. The EU Commission's proposal for a regulation creating a single supervisory mechanism is strongly...

The report discusses a variety of issues involving difficulties in the banking sector, with a view to ascertaining the appropriate institutional infrastructure in the context of the European Union and the euro area. Forbearance on the part of banks dealing with delinquent borrowers is...

The European macro-prudential policy framework operates at two levels. First, the ESRB has a legal responsibility for macro-prudential oversight in the EU. Second, various national and EU authorities have responsibility for the implementation of macro-prudential policy. The creation of a...

The euro crisis was fueled by the diabolic loop between sovereign risk and bank risk, coupled with cross-border flight-to-safety capital flows. European Safe Bonds (ESBies), a union-wide safe asset without joint liability, would help to resolve these problems. We make three contributions. First,...