Why SRF and EDIS Are Dangerous.

AuthorEngelen, K.

A veteran expert on European banking union, Roland Vaubel of Mannheim University, thinks that the Single Resolution Fund and the envisioned European deposit insurance scheme are dangerous. He makes the point that according to the EU Commission's latest report on the reduction of non-performing loans, the share of gross non-performing bank loans and advances differs enormously among the countries in the euro-zone. For example, it is highest in Greece (44.9 percent), Cyprus (28.1 percent), Portugal (11.7 percent), and Italy (10.0 percent), and lowest in Luxemburg (0.6 percent), Finland (1.1 percent), Germany (1.7 percent), and Estonia (1.8 percent).

According to the Basel Committee on Banking Supervision, claims on the government as a share of total bank assets also differ widely among eurozone countries: 18 percent in Italy, 13 percent in Spain, and 12 percent in Portugal, but only 6 percent in France. These claims are treated as riskless in the risk management of banks despite the Greek haircut of 2012.

Yet neither the share of nonperforming loans nor the share of the banks' claims on their government is among the risk indicators used to calculate the banks'...

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