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EU banking industry could face slow death


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Commenting on the latest EU proposals, Prof Philip Booth, Editorial Director at the Institute of Economic Affairs, said:

“The EU plan to ensure that shareholders and creditors bear banks’ losses so that they can be wound down in an orderly fashion has many good features. In particular it will make it less likely that taxpayers will have to bail out banks. There is also a problem in the EU that responsibility for deposit insurance schemes, responsibility for regulation and the functions of the ECB as a central bank are not aligned. This has created chaos in the crisis.

“However, there is a huge danger in these proposals that regulation will become more centralised, more burdensome and more bureaucratic. International banking regulation failed in the crisis and this attempt to centralise regulation and use the crisis to create “more Europe” could mean the slow death of a vibrant banking industry in the EU – especially if it is applied to non-eurozone countries such as the UK.”

Notes to editors

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The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.