European Banking after the 2023 Crisis

Key Messages

• The 2023 banking turmoil had limited effects on banks in the euro area and the EU. Nevertheless, there are important lessons to be learned 
• Business models matter. Specific banks in the US were hit, with a funding structure relying on sectorally concentrated large and related depositors 
• Bank runs have become faster due to less sticky deposits in an internet-based banking model and social media 
• Fragility is a feature, not a bug, of banking. There is no simple, one-size-fits-all solution to the prudential regulation of interest rate risk in the banking book 
• Basel III allows for the implementation of several policy options without major reforms in order to emphasize supervisory intervention, such as the introduction of criteria for risk-based pricing of deposit insurance premiums