Regulatory Response to the Financial Crisis in Europe: Recent Developments (2010-2013)

The purpose of this paper by the European Shadow Financial Regulatory Committee is to provide an account of the financial crisis in Europe during the period 2010-2013 and an analysis of how the relevant authorities reacted to the crisis. These actions included measures taken by central banks, governments or fiscal authorities, and by regulatory or supervisory bodies. In a previous study covering the regulatory developments during the financial crisis up until 2009, issues such as the implementation of Basel 3 rules in Europe and the (mostly ad hoc and unilateral) resolution mechanisms set in most European countries to fight the crisis were covered. This study focuses on developments that since 2010 and, in particular, the concerns and actions that emerged with the sovereign debt crisis in the euro area. In particular, the transition from the European Financial Stability Facility (EFSF) to the European Stability Mechanism (ESM) is assessed. Following these institutional developments, the focus after 2012 has progressively turned to the agreements and remaining challenges of the European banking union. These issues are jointly covered, along with some updates on the views of the ESFRC on recent advances in other areas, such as solvency regulation. All in all, we find that of the weaknesses of the global financial system remain to be addressed, and we believe that the banking union is one of the main tools and opportunities for an improved and efficient crisis management in Europe.