Luis Garicano, 17 December 2020

Without completion of the Banking Union, Europe’s Economic and Monetary Union will continue to be fragile and exposed to a return of the doom loop. This column provides a politically and economically viable solution based on first, creating a model ‘Safe Portfolio’ and, through a reform of the regulatory treatment of sovereign exposures, incentivising banks to move towards it; and second, reforming the resolution framework to empower the Single Resolution Board while simultaneously setting up, within it, a European deposit insurance based on the emerging consensus around a ‘hybrid model’.

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