As the successive crises since 2007 have shown, States act as ultimate guarantors of the financial system. This will remain true in the future, even if better regulation and the involvement of creditors of financial institutions make it possible to better define the risks borne by taxpayers.
In all developed countries where the financial sector was affected by the financial crisis of 2008-2009, the states supported the activity in order to avoid or limit the depressive consequences of this crisis. They have also acted as ultimate guarantors of financial institutions, particularly banks, whether they have been exposed to domestic debtors or international debtors. This intervention has taken various forms: debt guarantee, recapitalization, partial or total nationalization, a collapse structure guaranteed by the States for defaulting assets. Generally, the fact that the support measures have been implemented in some cases and urgently by the central banks, which in theory only intervene as “lender of last resort”
Public institutions have therefore substituted their own financial credibility for the lost or wavering banks or other financial intermediaries. At the same time, complex reforms to the regulation of the financial sector have been initiated, with the aim of limiting the cost of future crises to public finances.
In the Eurozone, these different types of public intervention have taken on complex forms owing to both the distribution of competences between the Member States, the Central Bank and the European Union, which vary according to Euro, which has been added to the financial crisis of 2008-2009.
At first, to summarize in broad terms, it was mainly the Member States that came to the rescue of banks and other financial institutions following the 2008-2009 crisis. The ECB lowered interest rates, increased the financing available to banks and relaxed the conditions it granted. Financial regulation being dealt with in Europe within the framework of the “internal market” and not of economic and financial policy, the effort to reform financial regulation was initiated at 27 rather than within the restricted framework of the Eurozone. Since competence over financial regulation is shared between the Union and the Member States, the latter have also carried out reforms on their own.
With the euro crisis, the zone states collectively supported the countries in crisis, via the European Financial Stability Fund (EFSF), which became the European Stability Mechanism (ESM). These countries have themselves supported their banking system. The ECB first contributed to this effort by further relaxing the terms of its financing to banks before providing them with exceptional support in late 2011 and early 2012 in the form of loans Exceptionally long maturity and a very high total amount of approximately EUR 1 000 billion (LTRO program). Finally, it was decided to allow the MES to intervene directly in the recapitalization of the banking sector of the countries in crisis, which was done in favor of the Spanish banks in early 2013.
It was not until mid-2012 that the Eurozone embarked on its own financial regulation with the decision of the European Council of 28 and 29 June 2012 to implement a single supervisory mechanism for European banks under the Of the ECB.
This policy decision was complemented by a Commission communication of 12 September 2012 proposing that the Eurozone should be a “banking union” based on three pillars: the single bank supervisory mechanism, a common deposit insurance And a common procedure for the orderly management of bank failures.
This tends to bring the Euro into the common law of the monetary zones with a single banking supervision and common insurance protection mechanisms.
The cornerstone of this building, however, is still lacking. Whatever the effectiveness of regulation and financial supervision, the volume of reserve funds to cope with a possible financial crisis, the agility of the ECB to deal with crisis situations, A guarantor of last resort, as the 2008-2009 crisis has shown.
In the other monetary zones, this role is played – implicitly but clearly enough – by the economic, political and financial credibility of the currency-issuing State, which has much to do with the management of the State And to the dynamism of the economy on which it is likely to draw the resources necessary for possible support to the financial sector.
In the case of the “banking union”, it is not known who would come to the rescue of the deposit guarantee fund if the resources constituted by the latter were exhausted, it is not known to whom would be responsible for mobilizing Sufficient resources to ensure that a bankruptcy, even if orderly, does not turn into a systemic crisis. We can just speculate that the member states of the Euro zone would find ways to cope groping, as is the case since 2010, involving perhaps, ultimately , the outcome of the strongest of them .
The Germans clearly prefer to clarify this issue. They argue that the common management of bank failures is inconsistent with current treaties (but perhaps also with their own constitutional and political constraints) and, as in the case of budgets, their preference for national solutions. A compromise was reached on this point with France in a joint declaration of 30 May 2013 proposing the maintenance of national resolution authorities alongside a single resolution council and, at the level of the Euro zone, “a mechanism Private support […] on the basis of private support arrangements at national level “.
This may not be enough for the Euro to have the guarantor of last resort, even implicit, that its durability requires.