The Stability of the European Financial System and the Real Economy in the Shadow of the Crisis

While still struggling with the legacy of the global financial crisis, European financial intermediaries have been additionally severely hit by the sovereign debt crisis. In order to prevent the collapse of the financial sector, the national governments and the Eurosystem have undertaken a number of measures ranging from adjustments in the regulatory framework to unprecedented emergency provisions. For instance, by imposing tighter capital and liquidity standards, regulators aim at strengthening the resilience of the financial intermediaries and restoring confidence in the markets. The Eurosystem’s special refinancing operations, in turn, are intended to resolve the acute funding strains on the banks and prevent them from cutting back lending to firms and households. At the same time, there is growing concern that the new capital requirements could further exacerbate the institutions’ problems, while the emergency provisions of the Eurosystem could give rise to moral hazard problems.

The goal of the conference is to provide a forum for discussion on developments in the European financial sector in the aftermath of the crisis. The discussion will focus on the financial intermediaries’ responses to the changing regulatory and economic environment and on real activities.