EUROPEAN BANKING UNION: EFFECTS AND CHALLENGES

EUROPEAN BANKING UNION: EFFECTS AND CHALLENGES

Zunic Dzelilhodzic, Emina

Abstract: This paper analyzes impact of new banking structure on different countries. Analysis include banking sectors of both: European Union members and non-European Union member’s countries. For the purpose of analysis, data from these banking and financial sectors for period 2008-2014 were used. European banking sector as well as entire financial sector integration is necessary. This necessity is deduced from the problems in this banking sector. Namely, widespread connection between banks and sovereigns which was detected by analysis of these two types of debts. Fragmentation of the Eurozone credit markets was, mainly, caused by sovereign debt crisis due their extremely high correlation. Analysis has shown that this was especially emphasized in peripheral countries of Eurozone. This was disclosed through correlation analysis of sovereign and bank Credit Default Risk premium. Therefore, banking union with good absorbing shock mechanism at union level, credible discipline on state level as well as with central regulatory mechanism should resulted in reduction of this correlation and its complete elimination in the long run. However, potential benefits of this new structure will be unequally distributed. Actually, effects will depend on number and size of banks which are located in certain country.

Conference or Workshop Item
PeerReviewed

2016

3322