Vítor Constâncio: Why EMU requires more financial integration
Keynote speech by Mr Vítor Constâncio, Vice-President of the European Central Bank, at the
joint conference of the European Commission and European Central Bank, Frankfurt am Main, 3
May 2018.
* * *
I am pleased to host you today in Frankfurt at the Financial Integration Conference. The 2018
Financial Integration Report is the last issue published under my tenure as ECB Vice-President. I
wish therefore to take this opportunity to reflect on the relevance of financial integration to
Economic and Monetary Union (EMU) and provide some suggestions for future directions.
Already at the very early stages of the project, it was clear that financial integration was needed
to make the Monetary Union sustainable. The 1970 Werner Report mentioned the complete
liberalisation of capital transactions and the full integration of financial markets as one of three
necessary conditions for a monetary union. Along with this, it was understood that the single
currency would secure the full benefits of a single market for capital.
During the run-up to the Maastricht Treaty and in the context of the Delors report discussions it
became clear that the dictum "one money one market" also implied addressing possible new
concerns about financial stability in Economic and Monetary Union. In some cases this translated
into prescient calls - like that from Alexandre Lamfalussy - for assigning the European Central
Bank a role in banking supervision. Eventually however the institutional set-up of Monetary Union
left financial stability considerations largely unaddressed.
This approach clearly showed its limits during the financial crisis. The financial fragmentation of
EMU during the financial crisis was partly a result of the initial choices concerning EMU's
institutional architecture - to be precise, its minimalist design which left economic and financial
policies mostly at national level. This was maybe due to an overriding faith in the efficiency of
financial markets that - even though not shared by all of EMU's founding fathers - prevailed in
Maastricht.
It has to be acknowledged, however, that over the following years, financial market integration in
EMU and at global level, accelerated at a speed that was hard to grasp in those early days after
the creation of Monetary Union.
The introduction of the single currency gave a major impetus to financial integration in the euro
area. Financial integration was impressive in terms of quantitative indicators but it was not
sustainable - it proved to be shallow and reversible. In fact, it even contributed to the rapid
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contagion in the early days of the crisis. We learned the hard way that a single currency
requires a financial system that is sustainably integrated and, indeed, as single as possible.
Much has been done to correct the initial design failures of EMU. Along with the introduction of
the euro, the EU's Financial Services Action Plan was launched to provide an overall framework
for the integration of financial services in Europe. With the surge of the financial crisis, it also
became very clear that macroprudential policy needed to complement both monetary policy and
microprudential supervision. The European Systemic Risk Board (ESRB) and the European
Supervisory Authorities were then established at the beginning of this decade.
However, these reforms quickly proved to be insufficient to keep pace with adverse financial
sector developments - especially concerning the role of the banking sector in the Monetary
Union. In response, the banking union project was launched in the depths of the financial crisis in
2012. But convergence in regulatory and supervisory standards is not enough to spur the
development and integration of capital markets that is needed for growth and private-risk sharing.
Therefore, efforts in this direction were also undertaken, with the launch of the capital markets
union (CMU) initiative.
In short, the history of EMU is marked by an evolving search for the right institutional embedding
of financial markets. And in that search, Europe has to be agile to react to changing
circumstances. In doing so it has to find a balance: between markets and regulation, between
liability and control, and between the European and national level. However, the crucial question
is whether we will achieve a sustainable financial integration that is commensurate with a single
currency.
Why financial integration is currently insufficient for EMU
The crisis made it clear that deep financial integration is essential to prevent EMU going into
reverse. Financial integration in Europe and in the euro area had been growing steadily before the
financial and sovereign debt crisis. However, the system was not structurally integrated and
when the crisis financial erupted integration quickly reversed, exactly when it was most needed.
In response to global and local shocks almost all financial markets became highly fragmented
and retrenched inside domestic borders. These developments represented an existential threat
to the Monetary Union and the single currency.
That fragmentation has reversed along several dimensions in the last few years. But significant
room for further improvements in financial integration remains, for example in the integration of
retail banking services and in the financing of the corporate sector.
Financial integration provides risk sharing mechanisms which can reduce the impact of
countryspecific shocks and contributes to macroeconomic stability. Internationally diversified portfolios -
cross-regional and cross-border asset holdings, including firm ownership claims - are more
resilient to global and local shocks and can mitigate the impact of such adverse scenarios. This
is particularly true when integration occurs also in the equity markets as opposed to the current
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bias towards debt finance intermediated by banks. For countries in a monetary union, this risk
sharing mechanism is particularly important because the single monetary policy is unable to
address asymmetric shocks, since other important adjustment mechanisms, for example
related to fiscal policy and exchange rates, are limited. Therefore more private financial risk
sharing can significantly improve the macroeconomic stabilisation of the euro area and thereby
3
the functioning of EMU. However, bear in mind that in recessionary periods, the power of this
risk sharing mechanism is significantly reduced, in particular via the powerful credit channel. Let
me point out that this channel accounts for about one-quarter in the United States and around
12% in the euro area, of the overall income smoothing that is achieved in both jurisdictions in
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normal times.
Perhaps even more important, financial integration is also essential to foster economic growth.
Integrated capital markets provide a wider source of financing and lower funding costs for
households and firms and ultimately support innovation and the efficient allocation of capital. A
financial system which allocates resources efficiently and is resilient to shocks ultimately
supports the transmission of monetary policy and its effect on price stability.
The banking union and the CMU affect different parts of the financial system at different stages of
development, but follow similar objectives to achieve a more efficient and stable financial system.
They are also complementary projects: work on them should run in parallel and require a solid
monetary union.
Completing banking union
The first task ahead is to complete the banking union. Each of its three pillars, notably the Single
Supervisory Mechanism (SSM), the Single Resolution Mechanism (SRM) and the planned
European Deposit Insurance Scheme (EDIS) address the risk of fragmentation. They are also all
necessary to ensure a proper balance between markets and regulations, and liability and control
at European and national level.
The SSM ensures that banks are subject to the same set of rules and supervised on the basis of
common standards. This reduces the risks of spillovers from bank failures to sovereigns and
provides a common framework conducive to further integration in the banking markets, a
process which has been lagging.
Since bank failures cannot always be avoided - and indeed this may not be desirable either, as it
may undermine market discipline - we need a credible and well-functioning crisis management
and resolution mechanism.
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This is ensured by the second pillar of the banking union. With the setting-up of the BRRD , the
Single Resolution Mechanism and the Single Resolution Fund (SRF), we have made a quantum
leap in the institutional organisation of the EMU. However, the framework is still incomplete. Most
notably, it requires a common public backstop to the SRF, which is essential to inspire full
confidence in the resolution regime. In addition, it would be desirable to eliminate national
divergences in the insolvency and liquidation of credit institutions, and in the implementation of
the BRRD through national resolution laws. Allowing these divergences to persist ultimately
implies that the geographical location of a failing bank may still influence the outcome of the
resolution, which is inconsistent with the idea at the heart of a banking union.
Finally, in order to complete the banking union, we need a single, fully-fledged EDIS. The EDIS
would strengthen depositors' confidence through an equal level of depositor protection across
Member States and therefore promote financial integration. Ultimately, a fully-fledged EDIS would
be strengthened by the pooling of resources, thus building confidence in the single currency,
throughout the Monetary Union. The finalisation of the banking union through its third pillar would
require an adequately sized fund, built and financed by banks by raising ex-ante contributions,
6
accompanied by a public backstop as recommended by the ECB opinion on EDIS. The
calibration of these contributions should help to minimise the risk of some banking systems
subsidising other banking systems in the event of a crisis. A recently published ECB Occasional
7
Paper simulating severe banking crises, demonstrates precisely that, with proper bank
riskbased contributions, an almost negligible cross-border subsidisation occurs. For this reason, a
crucial element of a fully-fledged EDIS would consist of risk-adjusted contributions to the fund
based on bank-specific strengths and weaknesses benchmarked at the banking union level.
Progress is also needed in the framework for macroprudential regulation. I regard this as a
precondition for safeguarding financial stability in an integrated market and therefore protecting
8
the Single Market. The CRR/CRD IV , the ESRB and the SSM Regulations already define the key
elements of the macroprudential framework, but as the framework is tested and more
experience is gained the rules will need to be steadily revised. Authorities with a mandate in this
area must have well-defined roles and responsibilities, including a distinct set of instruments.
Current overlaps between instruments should be eliminated, and more flexibility in the
macroprudential policy framework should be maintained, so that authorities can implement those
measures in a consistent and timely manner, which would require significant changes to Article
458 of the CRR.
A more integrated financial market will support the emergence of new types of risk and also
require extending the toolkit with new instruments. For the banking sector, this includes
complementing the toolkit with borrower-based instruments (such as limits on loan-to-value, or
loan-to-income ratios) as well as sectoral buffers and a time-varying leverage ratio add-on so
that all aspects of systemic risks can be addressed in the banking union. Finally, the mandatory
reciprocity framework needs to be expanded so as to ensure the effective mitigation of
crossborder spillover effects and regulatory arbitrage across jurisdictions in the EU.
The significant progress we have made with our banking union needs to be recognised also from
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the international regulatory framework perspective. A case in point is the G-SIB framework,
which currently penalises cross-border transactions within the banking union by attaching a
higher systemic risk score to banks with more transactions of that kind. This goes against the
very rationale of the banking union, as it reduces the incentives for cross-border transactions and
risk diversification, thus making banks more vulnerable to local shocks.
At the same time, we also need to remove the remaining obstacles to further integration within
our banking union. Such obstacles are often due to regulatory fragmentation and ring-fencing of
national markets. For example, a number of national options and discretions, such as diverging
large exposure rules, are hindering the free flow of liquidity and capital in the banking union and
should be harmonised further.
Turning to other parts of the financial system, we can expect that the CMU will provide further
impetus to the growth of market-based finance and may present new challenges to financial
stability.
Additional steps should be taken to strengthen the ability of European regulators and supervisors
to address systemic risks stemming from the non-banking part of the financial sector. This could
be achieved by expanding the mandate of relevant authorities and, in the medium run, by creating
a single supervisor for the capital markets.
Adequate macroprudential instruments need to be envisaged as well, including instruments
targeted at market-based finance. Macroprudential tools for this area either still need to be
provided to authorities or need to be further clarified in respect of their application. For Securities
Financing Transactions (SFT) and derivative markets, macroprudential margins and haircuts
have been identified as potentially powerful tools for reducing the excessive build-up of leverage
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and procyclicality in these markets. For alternative investment funds, the existing
macroprudential leverage limit needs to be operationalised. The forthcoming review of the
Alternative Investment Fund Managers Directive provides an opportunity to resolve any issues
that may hinder the future implementation of this leverage limit.
Moreover, as the ESRB recently recommended, for the investment fund sector, the role of
authorities when using their powers to suspend redemptions needs to be further specified in law.
In addition, European Securities and Markets Authority should have a general facilitation, advisory
and coordination role in relation to the National Competent Authorities' powers to suspend
redemptions in situations where there are cross-border financial stability implications.
The need for a European safe asset
The stability and integration of financial markets in the Monetary Union is also closely related to
the creation of a euro area-wide safe asset, for a number of reasons. First, it could help reduce
the excessive home bias in banks' sovereign exposures, which exacerbates the feedback loop
between banks and sovereigns. Reforms to the resolution regime (i.e. BRRD) have tackled the
issue from one direction, from banks to the sovereign. However, at present, there is no clear
solution for tackling it in the other direction, from the sovereign to the banks. The creation of a
euro area-wide safe asset, composed of a pool of sovereign bonds, would lead to a reduction in
the home bias of banks' portfolios by facilitating de-risking and diversification.
Second, a euro area safe asset would be crucial for the financial integration and the capital
markets union. In fact, it is necessary for the creation of an integrated, deep and liquid European
bond market as a central piece of CMU. A single term structure of risk-free interest rates could
serve as a euro area pricing benchmark for the valuation of bonds, equities and other assets.
The safe asset could also be used as collateral, for example for repo and derivatives
transactions across the euro area.
In principle, several options are available for creating a safe asset. Some options are not
politically viable, while others may not be economically sound.
I am not referring to the type of eurobonds that would replace national sovereign debt as a joint
liability of Member States, as these would require a deep political union. Various proposals have
been put forward, but I will concentrate on just two: a variant of the European safe bonds
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(ESBies) or sovereign bond-backed securities (SBBS) and the e-bonds as proposed in the
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Monti Report.
The current proposal of the SBBSs refers to a tranched, synthetic bond backed by national
sovereign bonds. The senior tranche would have very low risk levels, presumably below German
debt, as a result of the diversification gains based on historical correlations and of the protection
granted by lower-grade tranches. Market practitioners and rating agencies have been skeptical
about the instrument. Their main concern is a perceived lack of diversification to ensure that the
senior tranche can be indeed as safe as claimed because correlations among several countries'
debt could increase in a stressful situation (as occurred during the financial crisis). Also, it may
be difficult to sell the junior tranche at coupons that do not fatally compromise the overall
economics of the synthetic security issuance. Indeed, if the junior tranche had to be placed at a
relatively high coupon, then the senior tranche would need to offer a lower coupon than Bunds, a
doubtful selling prospect. This would likely render the economics of the SBBS as unviable, which
would be very unfortunate.
These obstacles could be overcome if, for instance, a small first loss tranche were to be covered
by public guarantee, jointly provided by member states. Such contingent liability could be limited
to a reasonable level. The success of the synthetic European Bonds would have significant
benefits for financial integration and for the banking and capital markets unions.
Alternatively, a European entity could issue e-bonds as a pure securitisation of sizable amounts
of national sovereign bonds but with a preferred creditor status over national sovereign bonds.
Such a structure would be less efficient and could increase the cost of issuing the
nonpreferential part of national debt that is not included in the securitisation. However, this could
even act as a disciplining device and would not necessarily imply an increase in the costs of the
total debt issuance. The amounts achieved could nevertheless be considerable. For instance,
according to a recent working paper of the Peterson Institute, in order to have an expected
fiveyear loss rate of 0.5% or lower, the European entity could securitise 50% of a country's debt or
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25% of its GDP.
Capital Markets Union, financial integration and economic growth
A European safe asset is crucial for the CMU project which in turn important for economic
growth. A big and liquid market, both of debt and equity, would spur innovation and enable the
development of an efficient venture capital market. This relates to the importance of boosting the
euro area's capacity to engage in activities conducive to innovation and productivity growth. In the
years since the Great Recession, the pace of productivity growth in Europe has been persistently
slow. In fact, European productivity growth had already started to stagnate during the
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mid1990s. While some economists have argued that this is all part of a global secular decline in
growth, driven by factors such as an ageing population and growth convergence across
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emerging markets, others believe that scientific progress will keep pushing the technological
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frontier forward.
In any case, it is vital that we have financing mechanisms in place in Europe that can support
science and technology's contribution to economic growth. One powerful way in which policy can
assist this process is by stimulating the emergence of deep and integrated European capital
markets. Capital markets, after all, play an important role in sharing economic risks and in
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smoothing consumption. But even more fundamentally, they contribute greatly to innovation
and growth. Evidence increasingly suggests that while both banks and markets are important for
the financing of economic growth, non-bank financial intermediation provides a relatively more
powerful contribution to innovation and productivity-enhancing activities in modern sophisticated
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economies, also in the euro area. Importantly, complementarities between banks and
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markets increase, as the economy develops, and so deep capital markets will end up
complementing banks as sources of financing. While the European Commission's current CMU
initiative is an important step in the right direction, a much more ambitious agenda for bolstering
capital markets in Europe is needed in the future.
Developing well-functioning capital markets which support economic growth across Europe
requires a comprehensive approach. To that end, Europe needs to boost the supply of equity
finance. Policies which stimulate individual ownership of traded shares, such as reducing the tax
advantage of debt over equity or enhancing financial literacy, can have a material effect on public
equity markets in Europe. At the same time, because stock markets often penalise companies
which undertake radical, but uncertain, innovative activities, the contribution of private equity -
particularly in the form of early-stage venture capital finance - is indispensable, as a critical
mass of angel investors who can provide financing for medium-size projects is also needed.
Only with a deep, liquid market is it possible to launch IPOs of successful projects that can offset
the losses with projects that fail.
Harmonising insolvency rules across jurisdictions would be a major step towards supporting
capital markets. This is critical for mobilising finance through capital markets, as it would create
incentives and favourable conditions for institutional investors to overcome the home bias in their
investment strategies. This is especially true for pension investment, as large private pension
funds tend to be a complement to deep capital markets. We need to establish a harmonised
regulatory environment for new types of finance, such as crowd funding. The emergence of
increasingly complex financial products needs to be accompanied by adequate consumer
protection of financial investment, in order to safeguard financial stability and ensure the
protection of individual investors.
The second component of a comprehensive approach entails policies that will stimulate
entrepreneurship. High-tech entrepreneurial firms that aspire to go public should be supported
and facilitated by stock exchanges specialising in IPOs for young innovative companies. A
reduction in the wedge between corporate income taxes and personal income taxes has already
been shown to have a strong positive effect on high-tech investment in a European
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context. Last but not least, the efficient application of R&D tax incentives and increased public
funding of private research universities, whose labs often make key scientific and technological
breakthroughs, are other important avenues for stimulating innovation and the commercialisation
of science.
Conclusion
Let me conclude. So far, measures adopted in the context of the CMU initiative, albeit positive
and helpful, are not yet commensurate with the ambition of the project. With CMU, we should aim
to reach a situation where both issuers and investors enjoy the same basic legal rights
concerning capital markets activity regardless of the EU country where they are located.
The CMU project involves all EU member states but it is particularly important for the euro area
member countries. It is a big waste to have taken the huge step to adopt a single currency and
continue to forgo the benefits that could be reaped by creating a true banking and capital markets
union. I believe that euro area countries should forge ahead in enhanced co-operation in order to
achieve CMU more rapidly.
We should however, be well aware that CMU requires a European safe asset, the harmonisation
of taxes on financial products, a convergence of company law, including on bankruptcy, the
creation of a single rule book of regulation for markets activity and ultimately a European Single
Securities Market Supervisor. The other big condition is a rock solid monetary union so that
assets' risks and returns are not significantly influenced by redenomination risk but exclusively by
their idiosyncratic features. A heavy toll, I know, but I will believe that the CMU project is possible
when I see authorities start making inroads in some of those difficult issues.
Thank you for your attention.
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Asdrubali, P., B. Sorensen and O. Yosha (1996), "Channels of Interstate Risk Sharing: United
States 1963-1990", The Quarterly Journal of Economics 111(4): 1081-1110.
Bank Recovery and Resolution Directive, 2014/59/EU of 15 May 2014 establishing a framework
for the recovery and resolution of credit institutions and investment firms and amending Council
Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC,
2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and
(EU) No 648/2012, of the European Parliament and of the Council.
Beck, R., L. Dedola, A. Giovannini and A. Popov (2016), "Financial integration and risk sharing in
a monetary union", ECB Report Financial Integration in Europe, Special Feature A.
Brunnermeier, M., L. Garicano, M. Pagano, R. Reis, T. Santos, D. Thesmar, S. Nieuwerburg and
D. Vayanos (2011), "European Safe Bonds", The Euronomics Group.
Capital Requirements Regulation and Directive IV includes: Capital Requirements Directive
(2013/36/EU) (CRD), which must be implemented through national law, and Capital
Requirements Regulation (575/2013) (CRR), which applies to firms across the EU.
Carmassi, J., S. Dobkowitz, J. Evrard, L. Parisi, A. Silva and M. Wedow (2018), "Completing the
Banking Union with a European Deposit Insurance Scheme: who is afraid of
crosssubsidisation?", ECB Occasional Paper 208, April 2018.
Claessens, S. (2016), "Regulation and Structural Change in Financial Systems", in The Future of
the International Monetary and Financial Architecture, ECB Forum on Central Banking
Conference Proceedings, 188-222.
Constâncio, V. (2016), "Margins and haircuts as a macroprudential tool", remarks at the ESRB
international conference on the macroprudential use of margins and haircuts, Frankfurt am Main,
6 June 2016;
Constâncio, V. (2017), "The future of finance and the outlook for regulation", remarks at the
Financial Regulatory Outlook Conference, Rome 9 November 2017.
Da Rin, M., G. Nicodano and A. Sembenelli (2006), "Public Policy and the Creation of Active
Venture Capital Markets", Journal of Public Economics 90:1699-1723.
ECB Opinion on 20 April 2016 on a proposal for a Regulation of the European Parliament and of
the Council amending Regulation (EU) No 806/2014 in order to establish a European Deposit
Insurance Scheme (CON/2016/26).
European Commission Report (2015), "Completing Europe's economic and monetary union", by
Jean-Claude Juncker in close collaboration with Donald Tusk, Jeroen Dijsselbloem, Mario Draghi
and Martin Schulz (the Five Presidents' Report).
European Systemic Risk Board (ESRB) (2017), "Sovereign bond-backed securities", ESRB
High-Level Task Force on Safe Assets.
Fernald, J. (2015), "Productivity and Potential Output Before, During, and After the Great
Recession", NBER Macroeconomics Annual 29:1-51.
Furceri, D. and A. Zdzienicka (2015),"The euro area crisis: need of a supranational fiscal risk
sharing mechanism", Open Economies Review 26(4):683-710; previously published in 2013 as
IMF Working Paper 13/198.
Hsu, P., X. Tian and Y. Xu, (2014), "Financial Development and Innovation: Cross-Country
Evidence", Journal of Financial Economics 112: 116-135.
Kremer, M. and A. Popov, (2018), "Financial Development, Financial Structure, and Growth:
Evidence from Europe", Special Feature A, ECB Report on Financial Integration in Europe.
Leandro A. and J. Zettelmeyer (2018), "The search for a Euro area safe asset", Peterson Institute
for International Economics Working Paper 18-3.
Mokyr, J. (2014), "Secular Stagnation? Not in Your Life", Geneva Report on the World Economy,
pp. 83-89.
Monti, M. (2010), "A New Strategy for the Single Market", report to the President of the European
Commission, José Manuel Barroso, May 2010.
Tumpel-Gugerell, G. (2009), "The road less travelled - exploring the nexus of macro-prudential
and monetary policy", speech at the conference Learning from the financial crisis: financial
stability, macroeconomic policy and international institutions, Rome, 12 November 2009.
van Ark, B., M. O'Mahoney and M. Timmer, (2008), "The Productivity Gap between Europe and
the United States: Trends and Causes", Journal of Economic Perspectives 22:25-44.
1
Tumpel-Gugerell, G. (2009), "The road less travelled - exploring the nexus of macro-prudential and monetary
policy", speech at the conference "Learning from the financial crisis: financial stability, macroeconomic policy
and international institutions", Rome, 12 November 2009.
2
Beck, R., L. Dedola, A. Giovannini and A. Popov (2016), "Financial integration and risk sharing in a monetary
union", ECB Report Financial Integration in Europe, Special Feature A; see also Asdrubali, P., B. Sorensen and
O. Yosha (1996), "Channels of Interstate Risk Sharing: United States 1963-1990", The Quarterly Journal of
Economics 111(4): 1081-1110.
3
European Commission Report (2015), "Completing Europe's economic and monetary union", by Jean-Claude
Juncker in close collaboration with Donald Tusk, Jeroen Dijsselbloem, Mario Draghi and Martin Schulz (the Five
Presidents' Report).
4
Furceri, D. and A. Zdzienicka (2015),"The euro area crisis: need of a supranational fiscal risk sharing
mechanism", Open Economies Review 26(4): 683-710; previously published in 2013 as IMF Working Paper
13/198; Asdrubali et al. (1996), "Channels of Interstate Risk Sharing: United States 1963-1990", The Quarterly
Journal of Economics, 111(4): 1081-1110.
5
Bank Recovery and Resolution Directive, 2014/59/EU of 15 May 2014 establishing a framework for the recovery
and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and
Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and
2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the
Council.
6
ECB Opinion on 20 April 2016 on a proposal for a Regulation of the European Parliament and of the Council
amending Regulation (EU) No 806/2014 in order to establish a European Deposit Insurance Scheme
(CON/2016/26).
7
Carmassi, J., S. Dobkowitz, J. Evrard, L. Parisi, A. Silva and M. Wedow (2018), "Completing the Banking Union
with a European Deposit Insurance Scheme: who is afraid of cross-subsidisation?", ECB Occasional Paper
208, April 2018.
CRD IV includes: Capital Requirements Directive (2013/36/EU) (CRD), which must be implemented through
national law, and Capital Requirements Regulation (575/2013) (CRR), which applies to firms across the EU.
9
Global systemically important banks.
10
Constâncio, V. (2016), "Margins and haircuts as a macroprudential tool", remarks at the "ESRB international
conference on the macroprudential use of margins and haircuts", Frankfurt am Main, 6 June 2016; Constâncio,
V. (2017), "The future of finance and the outlook for regulation", remarks at the "Financial Regulatory Outlook
Conference", Rome 9 November 2017.
11
ESRB (2017), "Sovereign bond-backed securities", ESRB High-Level Task Force on Safe Assets; for the original
proposal referring to ESBies see Brunnermeier, M., L. Garicano, M. Pagano, R. Reis, T. Santos, D. Thesmar, S.
Nieuwerburg and D. Vayanos (2011), "European Safe Bonds", The Euronomics Group.
12
Monti, M. (2010), "A New Strategy for the Single Market", report to the President of the European Commission,
José Manuel Barroso, May 2010.
13
For a good analysis of these and other proposals see Leandro A. and J. Zettelmeyer (2018), "The search for a
Euro area safe asset", Peterson Institute for International Economics Working Paper 18-3.
14
van Ark, B., M. O'Mahoney and M. Timmer, (2008), "The Productivity Gap between Europe and the United States:
Trends and Causes", Journal of Economic Perspectives 22:25-44.
15
Fernald, J. (2015), "Productivity and Potential Output Before, Du