THE NECESSITY OF AN UNIFORM REGULATION FOR THE MANAGEMENT OF BANKING RISK AT THE EUROPEAN LEVEL

Abstract

In spite of the fact that both national and international bodies of authorities, such as national Central Banks, International Monetary Fund, the World Bank, or The Basel Committee have approached risk management, at present there is clear indication that the implementation of Basel III will improve the financial sector stability. The significance of the need to have a unified approach in analyzing risks, especially the credit risk which is the most overwhelming of them all, lay in the fact that risks have the ability to directly affect the financial stability and ultimately lead to systemic risks. In this context, what the economic crisis has done was to highlight the importance of approaching risks with the utmost care. The direct connection between economic growth and banking system (Kyriaki Kosmidou, Pasiouras, & Floropoulos, 2004; Liu, Molyneux, & Wilson, 2013; Perera, Skully, & Chaudrey, 2013) but also the influence that the banking system has on the economic growth (Borio, 2014) makes it imperative for supervisory authorities to implement measures in order to maintain the stability of banking system. The European Central Bank has implemented the Single Supervisory Mechanism and the Single Resolution Mechanism in order to have a banking system much better prepared to face any financial or economic shocks.

Keywords

• risk; systemic risks; financial stability; global economy.