The Quiet Bank Run

Posted on

"The Quiet Bank Run"

One point that senior administration people made to me recently is that the Eurozone doesn’t just have fiscal/monetary problems, it has bank regulation problems. The idea of a single currency is that a Euro in Finland is the same thing as a Euro in Slovakia. But if Finnish and Slovak banks are regulated in different ways by different entities with different fiscal capacities, then a Euro in a Finnish bank and a Euro in a Slovak bank are not in fact the same. Hence this quiet bank run:

Precisely because there’s a currency union, it’s relatively frictionless to shift Euros out of Spanish banks and into German ones. But if you’re going to have these kind of frictionless financial flows, you should really have a consolidated bank regulator.


« »

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.