G21 - Banks; Depository Institutions; Micro Finance Institutions; MortgagesReturn

The banking union creates the system for banking supervision and banking crises solution based on single European Union rules. The Bank Recovery and Resolution Directive (BRRD) means an important milestone, the main goal of which is to limit government assistance to failing banks (bailout) and replace it with a bail-in system. The article focuses on Italian banking crises solution and points out that despite the existence of banking union rules, there is legal possibility to circumvent and save banks via the public finances (bailout). On the one hand "Italian solution" confirms that there are strong weaknesses in the current rules of the banking union, on the other hand it can be interpreted as a flexible framework that can be tailored to a specific country. The article explains the reasons for the distinct solution of the banking crisis in the Italian banking sector and evaluates the impact of this solution on the further banking union completion.

This paper evaluates the main shortcomings and potential risks of the current shape of the EU's banking union. The institutional set-up of the single banking supervision is called into question; the rationale behind its establishment is explained and possible drawbacks are pointed out. Further and mainly, the paper concentrates on the analysis of the single banking resolution and its supporting legislation in the form of the Bank Recovery and Resolution Directive (BRRD). The BRRD's main innovation, the "bail-in" principle of resolving failing banks is assessed, both in terms of clear advantages as compared to the classic public bailout, and of potential drawbacks, especially concerning the contagious effects and adverse impact on specific groups of creditors with political repercussions. The European bail-in is also compared to the US "Dodd-Frank Act solution", yet there has not been found any straight forward inspiration for the European scheme. Finally, the need for a common fiscal backstop is identified given the resource inadequacy of the current single resolution fund, especially if a major systemic crisis occurs. Thus, various arrangements of the fiscal backstop are proposed; it is argued that the European Stability Mechanism would serve the backstop purpose better than the options involving national budgets.

We observe increase in TARGET2 balances of certain central banks in European Monetary Union (EMU) after 2008, especially in case of central banks from Germany and eurozone's south wing countries. The aim of this article is to explain the problem of TARGET2 imbalances, describe creation of TARGET2 position, their determinants and to provide proposals of possible solutions using basic literature regarding the topic. There are few approaches for explaining, what are the main drivers of TARGET2 imbalances. The current account balances have been balanced by corresponding movements on financial accounts until 2008, therefore no significant positions in TARGET2 occurred in pre-crisis period. After financial crisis, capital flows inside EMU, which helped in balancing of TARGET2 positions, changed. Regular redemptions or limits for TARGET2 liabilities belong among possible solutions of imbalance in the payment system.