The Political Economy of the European Banking Union

Junior Professorship Lena Tonzer, PhD: The Political Economy of the European Banking Union: Causes for National Differences in the Implementation of the Banking Union and Resulting Effects on Financial Stability

This project evaluates the implementation of the Banking Union and its impact on the banking sector. The first question is whether the implementation of the banking union is proceeding as planned and which factors explain a delayed introduction (subproject 1). The aim is to test the extent to which characteristics of the political system and the banking sector influence the implementation of the banking union. In a second step, the success of the banking union depends on the effects on the banking system (subproject II). On the one hand, explicit rules can have a positive impact on risk behaviour in the banking sector. On the other hand, banks may have incentives to evade the stricter rules. The viability of the banking union is also linked to the resulting consequences for real economic enterprises and private households (subproject III). Stricter rules should increase banking stability in the long term, prevent crises and thus stabilise financial intermediation.

The analysis of the three subprojects of the priority area, which is to become part of the Research Cluster Financial Stability and Regulation at the IWH, requires the compilation of a comprehensive data set. The first priority is to record the dates at which the EU directives will be transposed into national law. In a second step, country-specific information on the political and institutional framework in the member states will be collected. These are supplemented by data on macroeconomic developments and the state of the banking system. The dataset will be extended with data at the banking and enterprise levels to analyse the impact on banking stability and the real economy. The subsequent processing of the questions is carried out using econometric methods for microdata.

The objective of this project is to provide high-quality scientific research which delivers relevant implications for economic policy. The results obtained will be presented at renowned international conferences and integrated into the policy process. Scientific papers are submitted to recognized journals for review and with the aim of publication. The establishment of this priority area is intended to create the basis for the acquisition of third-party funding. Furthermore, the priority area has great potential to become an important pillar of the IWH-CEP. Finally, the priority area is ideally suited to supplement the Financial Markets Department at the IWH with a current topic that is of relevance for economic policy and thus to expand expertise in financial market research in Saxony-Anhalt.

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