European Union Banking and Supervisory Structures in Response to the Debt Crisis (Essay Sample)

European Union Banking and Supervisory Structures in Response to the Debt Crisis
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The financial crisis of 2007-2008, affected Europe’s economy amid 2007 and 2009, which was first experienced in the United States. The crisis began when the subprime mortgages were foreclosed resulting in a drop in profits realized by banks in both Europe and the United States. The crisis affected the lending institutions in Europe because they had embraced a similar business approach to the banks in the US prior to the financial crisis (Burke, 2016). Several accounting firms and nations have since advocated for an evaluation of regulation and supervision of lending bodies in the European Union to mitigate the severity of an imminent financial calamity. The recommended policies cover corporate and capital structure of lending institutions along with their liquidity. This paper argues these approaches and their success in evaluating whether, the supervisory and banking structures at the EU were satisfactory in countering the debt crisis (Habermas & Cronin, 2012).
The EU fortified policy alignment and coordination among its members to respond to the financial crisis. The Council and EU parliament accomplished this by executing “Six Pack”, a statutory set established on economic governance. “Stability Growth and Pact” policy was made stronger by this statutory in the fiscal policy region (Govaere, Lennon, Elsuwege, Adam, & Maresceau, 2013). “The Two Pack” package decree was implemented in May 2013; it had two primary objectives of improving economic and financial observation in the EU by monitoring countries with financial uncertainty. Secondly, progress the harmonization of the budgetary structures through the indication of timelines for the monetary processes in the European zone (Olsson, 2009).
The financial crunch showed a severe insufficiency in the financial services sector framework preceding the crisis, as being inept to respond to the recession early enough. To elude similar financial disasters happening again, the EU established new commissions to oversee financial institutions. Among these authorities were; Occupational Pension Authority (EIOPA), Systematic Risk Board for Macro-prudential Supervision (SRBMS), European Banking Authority (EBA), and European Securities and Markets Authority (ESMA) (Wymeersch, Hopt, & Ferrarini, 2012). The Union also called for the restructuring of banking institutions to improve the efficiency of monetary guidelines. In addition to these measures, the Council has approved essential pillars for example Capital Requirements Directive (CRD) tasked with setting practical requirements for financial firms (Jackson, 2010).
The positive impacts of European Union supervisory and banking structures are seemingly bearing fruits, and a recurrence of a financial crisis in the banking sector is not likely in the near future. Therefore, it can be concluded that the supervisory and banking structures applied by the EU have substantiated to be adequate in reacting to the financial meltdown. Among the Council...