Will bank supervision in Ohio and Austria be similar? A transatlantic view of the Singl... - 0 views
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At the inception of the euro, it was thought possible to have a centralised monetary authority and decentralised bank supervision, but the inability to separate sovereign-debt problems from those of bank stability has led the leaders of the member states of the EU to agree to centralise supervision in the Single Supervisory Mechanism.
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The states retained their powers to supervise the small number of state-chartered banks that seemed little threat to the stability of the new more tightly regulated national system.
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What was not anticipated was that the more stable national banks would fail to adequately supply credit to the economy.
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States, not the federal government, regulated securities markets and insurance, leaving little oversight for interstate business.
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The 1930s New Deal reforms added more agencies, including the Securities Exchange Commission and the Federal Deposit Insurance Corporation, complicating political oversight by giving them distinctive missions,
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Yet, it was the trust companies, lacking access to emergency liquidity that caused the 1907 crisis to erupt and spread to the banks.
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To remedy these defects, the Federal Reserve System, established in 1913, was to act as a lender of last resort, bringing all systemically important institutions – national banks , large state banks and trust companies – under the federal supervision of the Office of the Comptroller of the Currency or the Federal Reserve banks.
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Consequently, when onerous rules, such as the prohibition on branch banking prevented banks from financing the emerging giant corporations, markets, assisted by more lightly regulated trust and insurance companies, stepped in.
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But, they have not converged, especially with regard to state banks that often pressure state regulators.
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Surveillance of a bank is not dependent on the geographic scope of its operations, as in the US, but on its systemic significance measured in several dimensions and whether it receives financial assistance from the European Stability Mechanism.
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The ECB will not be directly involved in crisis management and bank resolution, which will be the responsibility of the national authorities. This autonomy will not be incentive compatible until EU directives are adopted for a unified deposit insurance system and a funded single resolution authority.