Rethinking banking supervision in the EU

As the long-standing attempt to create an integrated European banking market is showing signs of success,1 the costs and benefits of the traditional reliance on national banking supervision and the (de)merits of alternative arrangements are receiving attention in a lively literature involving both practitioners and academics. While it is too early to draw conclusions, the current episode of financial distress will shed light on some of the issues involved. A growing theoretical literature explores the implications of alternative regulatory and supervisory arrangements taking account of the interaction between institutional features, informational issues and incentives structures, inter alia.