Both the financial crisis of 2008 and the debt crisis in the years to follow were largely due to malfunctions and regulatory deficits in the financial sector. As a result, financial sector reform, and banking regulation in particular, lie at the heart of the reform agenda of European and international economic policy. With the establishment of the European Banking Union, policy in Europe has taken important steps to improve the framework of the financial sector. Despite these reforms, the banking sector in Europe remains prone to crises. In many countries the banking sector is perceived to be too large. Core components of the banking unions, and notably the bail-in rules, have not yet been put into practice and are disputed by some member countries.
For this reason, EconPol Europe will address the following three research questions:
- What are the effects of the change in the capital requirements in the banking regulation on banks’ lending?
- Is the bail-in of debt capital an effective substitute for more equity?
- What is the best way to deal with non-performing loans (NPLs)?