Europe is expected to launch a series of measures inspired by the US banking crisis, such as Silicon Bank, Signature Bank of New York and First Republic Bank in 2023.
This is what a study by several researchers from the Bank of Italy claims, which states that it is necessary to continue with the international Basel rules and to modify the EU regulatory framework for crisis management by making it “more flexible” in certain cases. Even episodes of banking crises that are not considered “systemic” can in fact pose risks to financial stability.
In detail, the work of the Via Nazionale shows, the failure of the three American banks demonstrated the importance of internal controls (lacking in this case) and the concern for liquidity and the preservation of customer deposits that in the case of Svb flowed into the block in a single day ($40 billion), forcing the Federal Reserve to intervene urgently, which was done quickly.
The Bank of Italy points out that the Basel Committee has already identified areas where regulatory attention should be paid. In Europe, they explain that the “rigidity of the regulatory framework” “threatens financial stability” and that, together with the absence of a “real European deposit insurance system”, the potential European crisis management system “remains incomplete”. It is therefore possible to make deposit protection more comprehensive (currently only those below €100,000 are protected by national schemes) but this could also have some drawbacks. For this reason, the study concludes that a global approach to banking supervision is needed that takes all aspects into account.
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