Nicolas Véron

A Long Term Vision for Europe's Capital Markets Union

Last Saturday in Riga (Latvia), I presented this paper to the EU's financial ministers and central bank governors gathered for the "informal ECOFIN" meeting, jointly with Bruegel's director Guntram Wolff. This was in response to a request from the Latvian Government, which currently holds the presidency of the Council of the EU. 

In the paper, we propose a definition of the Capital Markets Union agenda, an analysis of its rationale and potential economic impact, a concrete policy agenda, and a possible way to implement it with realistic sequencing, taking into account the European Commission's announcement of an "action plan" to be published later this year. 

Download the document here in PDF format in case the above link does not work. 

Defining Europe's Capital Markets Union

Bruegel today published a Policy Contribution in which I explore the EU's "concept under construction" of a Capital Markets Union. I argue that to make a meaningful (and positive) impact, the corresponding policy agenda must be much more ambitious than tinkering at the edges of securities regulation, and should include politically difficult areas such as corporate financial disclosure requirements, the supervision and resolution of financial market infrastructure firms, insolvency and debt restructuring frameworks, and tax. 

A revised version of this paper was included in a collective e-book of the Peterson Institute on December 9, on policies to revive Europe's anaemic growth. 

Click here to download the study if the above link doe not work. 

The G20 Financial Reform Agenda after Five Years

Yesterday was the five-year anniversary of the Pittsburgh Summit which marked the culmination of the G20's effort on financial regulatory reform. Bruegel just published my status report and assessment, first delivered at a joint conference with the Peterson Institute and CF40 earlier this year in Beijing. 

The paper was also published together with other contributions of PIIE scholars at the same conference, and available here. the Bruegel version can also be downloaded here in case the above link is broken. 

To-Do List for the Next Financial Services Commissioner

Bruegel recently published its Memos for the New EU Leadership, a collection of essays about the agenda for the next five-year term in key economic policy areas, following on a similar initiative five years ago. Together with Silvia Merler we co-authored the Memo to the Commissioner for Financial Services, in which we outline five key challenges and corresponding policy recommendations. 

Click here to read the memo in PDF format or in case the above link is broken. 

A Realistic Bridge Towards European Banking Union

Bruegel and the Peterson Institute both published this new paper, in which I emphasize the crucial importance of the handover of supervisory authority to the ECB in late 2014 and of its adequate preparation. This transition will most likely include a wave of bank restructuring that will shape the future of Europe's banking policy framework. 

Click here to upload the version published by Bruegel. 

Click here to upload the version published by PIIE. 

The texts of the two versions are identical. 

Non-Bank Credit and Financial System Resilience

This paper, also downloadable from the Bruegel website, was initially prepared for a joint conference of the Peterson Institute and the CF40 (China Finance 40) Forum in Beijing on April 13-14, 2013, and published in the conference volume. It is meant as a preliminary basis for future research and tentatively explores the role of non-bank credit in financial systems beyond the focus on "shadow banking". Specifically in the US, the unique development of non-bank credit channels appears correlated with higher systemic resilience, in contrast with bank-dominated Europe.

From Supervision to Resolution: Next Steps on the Road to European Banking Union

This policy note was published last Friday by the European Parliament in anticipation of their "Monetary Dialogue" hearing of ECB President Mario Draghi yesterday (other papers prepared for the same occasion are here). It was republished today by Bruegel and the Peterson Institute in their respective policy series. The content of the three versions (European Parliament, Bruegel, and PIIE) is identical. 

In the note, Guntram Wolff and I provide an in-depth analysis of the sequence defined by the European Council in mid-December to complete Europe’s banking union, starting from the first step of creating a Single Supervisory Mechanism (SSM) hosted by the European Central Bank. We make specific recommendations on the successive steps, including the finalization of the SSM Regulation, other pieces of EU legislation (Capital Requirements Regulation, Bank Recovery and Resolution Directive, Deposit Guarantee Schemes Directive), the operational framework that will enable the European Stability Mechanism to recapitalize banks directly, the future “Single Resolution Mechanism” that is intended for discussion later this year and in 2014, and further steps at an even later stage.

We also make the point that policymakers should take decisive action to restore trust in the European banking sector before the Single Resolution mechanism is finalized, because the economic cost of waiting at least 18-24 more months would be simply too high. Article 27(4) of the SSM Regulation in particular provides a unique opportunity for a proactive, system-wide initiative for the assessment and restructuring of Europe’s banks in late 2013 / early 2014. 

The note was presented to the press this morning. Click here to listen to the conversation as recorded on the Peterson Institute's website. 

In case the above links do not work, the note can also be downloaded directly here as published by the European Parliament, by Bruegel, or by the Peterson Institute. 

Briefing Paper for the European Parliament: Single Supervisory Mechanism

On October 4, I was invited to present a briefing paper at a meeting of the Economic and Monetary Affairs (ECON) committee of the European Parliament, in preparation of their hearing of European Central Bank President Mario Draghi the following week. the paper is about the European initiative to create a banking union and more specifically the European Commission's proposals for A Single Supervisory Mechanism and related reform of the European Banking Authority, published on September 12.

Bruegel later published a lightly edited version of the same paper in its Policy Contribution series, available here. The paper is also available on the European Parliament's website.

December 11 update: an updated and slightly expanded version was also published by the Peterson Institute (PDF version here)

 

US Senate Testimony - The Future of the Eurozone

Click here to download the PDF version of the statement I delivered today at the US Senate, Committee on Foreign Relations, Subcommittee on European Affairs chaired by Senator Jeanne Shaheen. 

A video of the hearing is available on the Senate's website, as well as the statements of the other two witnesses, Frances Burwell and Simon Johnson. 

The statement was also published by the Peterson Institute and by Bruegel. 

Roadmap towards a European Banking Union

Earlier this week, Bruegel published this paper in which Jean Pisani-Ferry, André Sapir, Guntram Wolff and I discuss the key policy choices associated with the vision of a European Banking Union, and outline the possible steps that can be taken in that direction. 

Click here to download the paper if the above link does not work. 

An Assessment of Financial Reform - So Far

I contributed this article to a forthcoming book co-edited by Barry Eichengreen (UC Berkeley) and Bokyeong Park (KIEP). The piece attempts to assess the financial reform induced by the crisis so far, and to see the forest for the trees - a challenging task given the multiplicity of reform initiatives and the unfinished nature of most of them. 

Click here for the version published in the PIIE Working Paper series. 

Click here for the version published in the Bruegel Working Paper series. 

Rating Agencies and Sovereign Credit Risk Assessment

Bruegel just published this Policy Contribution co-authored with Guntram Wolff, at the request of the European Parliament. Building on my earlier piece on credit rating agencies, we examine a series of policy questions specifically related to sovereign credit ratings and their role in financial policy. 

Click here to download the piece in case the above link does not work. The European Parliament has also published it on its own website, with the same text in a different format

Policy Contribution on Credit Rating Agencies

This policy contribution was simultaneously published by Bruegel and published by the Peterson Institute. In it, I summarize the European debate on credit rating agencies, the problems they pose and some possible solutions. I warn against the unintended consequences of ill-designed regulation, and suggest that the most important issue in this debate is to improve the quality and scope of issuers' public disclosures about their financial risk factors. 

US Senate Testimony: the European Debt and Financial Crisis

On 22 September, I was a witness at a hearing of the Subcommittee on Security and International Trade and Finance of the US Senate Committee on Banking, Housing, and Urban Affairs. My written statement is accessible here, and a webcast of the entire hearing including my oral testimony and questions is here. 

Click here for the publication in Bruegel's Policy Contribution series. 

Click here for the publication on the Peterson Institute's website. 

Keeping the Promise of Global Accounting Standards

This is published with much delay, due to technical problems I had with TypePad. In July Bruegel and the Peterson Institute published my policy brief on the future of International Financial Reporting Standards (IFRS), in which I make policy recommendations as regards both the governance of the IFRS Foundation and the implementation of the standards in individual jurisdictions. 

Click here for the Bruegel version; 

Click here for the PIIE version. 

Reform of the IFRS Foundation - Another Public Consultation

Once again, I responded to a public consultation on how to reform the governance of the IFRS Foundation, which hosts the International Accounting Standards Board - this time in response to a consultative report of the Foundation's Monitoring Board, currently composed of a limited number of public authorities. This follow my response last month to another consultation, by the Foundation's own Trustees.

It is a somewhat specialized debate, but if you have a taste for the politics of accounting you will certainly enjoy it.

My letter was posted by the Monitoring Board on the IOSCO website. Click here for a PDF version.

May update: Bruegel also published an adapted version in its Policy Contribution series.

Too Big To Fail: The Transatlantic Debate

 

The Peterson Institute and Bruegel published this Working Paper, in which Morris Goldstein and I analyze historical and structural differences between the US and EU, which help explain the differences in policy debates and decisions on the "too-big-to-fail" problem which lies at the core of current prudential regulatory debates.

Click here for the PIIE version in PDF if the above link does not work, and click here for the Bruegel version as published in early February.

Update: Morris and I later published a summary of the argument for Vox and NRC Handelsblad.  

EU Financial Regulatory Reform: A Status Report

 
Bruegel just published the text of a paper I presented at the Brookings Institution last week, as part of a discussion co-sponsored by the Heinrich-Böll Foundation on current financial policy challenges. In this piece, I analyze the differences in the timing of the regulatory response on both sides of the Atlantic, and briefly outline challenges ahead for the EU.

Click here to read the paper, or click here to upload it from Bruegel's website.

The paper was originally published by Brookings and also later by the Peterson Institute.

Not All Financial Regulation Is Global

Bruegel today published a policy brief by Stéphane Rottier (Adviser at the National Bank of Belgium) and myself, in which we look at how the crisis has changed the conditions of the global financial regulatory debate.

We identify key new trends and make corresponding recommendations to global leaders, with an emphasis on the subsidiarity principle and on keeping capital markets globally integrated.

To support the analysis we simultaneously produced a policy contribution which was also published today by Bruegel.

Update: the paper was later published, with a few improvements, by the Peterson Institute. 

IFRS Governance Reform - Letter to the IASC Foundation

Last week Bruegel published my response to a consultation by the IASC Foundation, the body that oversees the setting of International Financial Reporting Standards (IFRS), on reform of its governance arrangements. In my response, I call for more ambition in making the Foundation accountable to its ultimate stakeholdersin the global investment community.

Click here to read the document if the above link does not function.

Bruegel's Memos to the Next Commission

Yesterday, Bruegel published Memos to the new Commission, a collection of essays by Bruegel scholars on the key policy challenges and priorities the European Commission will face over the next five years. I contributed the memo on Financial Services Policy, and coauthored the one on Enterprise and Industrial Policy together with André Sapir.

Click here in case the above link is broken.

A 'Treuhand' To Solve Europe's Banking Problem

 

In a new Bruegel Policy Brief co-authored with Adam Posen, we describe 'Europe's banking problem' as a high reliance of the European economy on a badly damaged banking system. History confirms the only way to solve it is 'triage', i.e. differentiation among banks on the basis of their actual capital position assessed through a consistent process and publicly disclosed, then restructuring of those banks which would not subsequently succeed to meet their capital needs.

But in continental Europe, advanced cross-border integration means that triage and restructuring cannot be effective if conducted only at national level. As no existing supranational institutions can realistically do the job, we advocate the creation of a temporary fiduciary agency or 'Bank Treuhand' by a critical mass of European countries. The Treuhand would assess major banks' balance sheets and publish triage results, catalyse restructurings by being a broker for negotiation among national governments, and manage distressed assets that would be brought into public ownership as the result. It would also buy time, and pave the way, for the longer-term task of reforming the EU's supervisory architecture in order to make cross-border banking sustainable.

Click here to download and read the Policy Brief as published by Bruegel (only in English).

Click here to read the piece as published by the Peterson Institute for International Economics on 16 June 2009.

US Adoption of IFRS: My Letter to the SEC

 

The US Securities and Exchange Commission has conducted a public consultation on the roadmap it proposed last year (under then-Chairman Chris Cox) to adopt International Financial Reporting Standards in America. Yesterday I responded with a few suggestions about how the SEC should both support IFRS, and push for reforms of standard-setting and global enforcement.

Click here to download my letter, as subsequently published by Bruegel in its Policy Contribution series.

Credit Rating Agencies

Bruegel just published this briefing paper which I prepared a few weeks ago at the request of the European Parliament's ECON (Economic and Monetary Affairs) committee. In it, I argue that the information and reference privileges currently enjoyed by credit rating agencies should be dismantled to establish a fairer competition with other financial risk assessment services providers. This is far more important than regulating the agencies themselves.

Download BruegelPolicyContribution_Feb09_Ratings in case the above link does not work.

Safe and Sound: Bruegel Policy Brief on Sovereign Investment

Bruegel today released 'Safe and Sound: An EU Approach to Sovereign Investment', a new policy brief I co-authored with Lars-Hendrik Röller. In this piece, we take a broad look at the debate over economic nationalism, sovereign wealth funds and the security risks that may arise from foreign acquisitions.

We conclude that it is time for the EU to envisage what the US did with the Exon-Florio amendement twenty years ago, i.e. building a common legislative framework for the review of foreign investment from a national security viewpoint - even if the security assessments and corresponding decisions on individual foreign acquisition cases should for the time being remain in the hands of member states.

Download BruegelPolicyBrief_071108.pdf if you cannot access the document with the above link.