The debate within the Seanad around Senator Sean Barrett’s private member’s bill on financial stability and reform is here. It’s well worth looking at. Some of the contributions are excellent, and I think it gives us a sense of what’s going on within policy circles as well as they types of legislative actions that might be considered by the government in the coming years around transparency and accountability.
The Eurozone banking system is not working properly due to fragmentation between core and peripheral banking systems. In a recent speech, the president of the ECB, Mario Draghi, has acknowledged this, but argues that fixing this problem is someone else’s responsibility. The ECB has the tools to address this crucial flaw in the Eurozone system, and over the medium term horizon there is no other Eurozone institution that can. The ECB should use the tools available to fix this market fragmentation, in particular, the ECB should engage in aggressive, long-term asset refinancing on sufficiently generous terms to encourage bank participation.
There is a new BIS paper on the implications of a central bank’s balance sheet.
Abstract:
This paper looks at the relevance of a central bank’s own finances for its policy work. Some central banks are exposed to significant financial risks, partly due to the environment in which they operate, and partly due to the nature of policy actions. While financial exposures and losses do not hamper central banks’ operational capabilities, they may weaken the effectiveness of central bank policy transmission. Against this backdrop, the paper analyses the determinants of a central bank’s financial position and the possible implications of insufficient financial resources for policymaking. It also provides a conceptual framework for considering the question of whether central banks have sufficient financial resources.
The European Commission sponsored a project on the future of EMU over the last few months: this Economic Brief by Robert Kuenzel and Eric Ruscher provides an overview. Some of the papers are now available in the European Economy Economic Papers series (including my own paper “Capital Flows in the Euro Area”):