It is an established assessment that since the Eurocrisis, the Euro area banking system has been fragmented. Representing the Eurozone’s monetary architecture as a web of interlocking balance sheets, we carve out four different types of fragmentation that pertain to different parts of banks’ balance sheets and a different set of counterparties. The first type affects the size, scope, and business model of EA banks; the second the cross-border interbank lending among EA banks; the third the monetary policy transmission via EA banks; and the fourth the harmonization of public backstops for EA banks. We argue that the first two types of fragmentation can in principle be mitigated by using ‘offshore channels’ for cross-border banking activities. Euro area banks are not restricted to using EUR-denominated instruments inside the Eurozone monetary jurisdiction but may carry out cross-border activities in other units of account than the EUR (notably the USD) and in other booking locations (notably via their branches in the United Kingdom and the United States). Using data derived from the BIS’s international debt securities and locational banking statistics, we analyse whether the use of these offshore channels warrants a re-assessment of established findings on the fragmentation of the Euro area banking system.
‘Primary Dealers in the Offshore US-Dollar System. Intermediating Treasury and Central Bank Balance Sheets’ (with Will Bateman)
This study analyzes the Primary Dealer model for the issuance and distribution of sovereign debt as a distinctive feature of today’s international monetary system, the Offshore US-Dollar System. Primary dealers are a group of private […]
‘European Monetary Unification through Novation. The Political Economy of the TARGET System’ (with Matteo Giordano)
When Economic and Monetary Union became effective in January 1999, it remained unclear what accounting treatment to choose for claims and obligations that the Eurosystem’s National Central Banks (NCBs) incur against each other in the […]
‘The Transformation of Eurozone Fiscal Governance. Mitigating Fiscal Discipline through a Proliferation of Off-Balance-Sheet Fiscal Agencies’ (with Andrei Guter-Sandu), New Political Economy
The original Maastricht regime designed the Eurozone’s fiscal segment in a way that sought to keep member states’ treasury budgets balanced by disciplining them through market forces, reducing the overall volume of public indebtedness, prohibiting […]