Europe’s banks are stronger than they were, but not strong enough
A marathon of regulatory reform has further to run
（释义见文章结尾）
THE permanent revolution rumbles on. Ten years after the financial crisis, Europe’s bankers must wonder whether the regulatory upheaval will ever cease. Next month two European Union directives start to bite. MiFID2 will make trading more transparent and oblige banks to charge clients separately for research; PSD2 will expose banks to more competition from technology companies, and each other, in everything from payment services to budgeting advice. A new accounting rule, IFRS 9, also kicks in, demanding timelier provisions for credit losses. The global capital standards drawn up after the crisis, Basel 3, may at last be on the verge of completion—implying yet another uptick in equity requirements for some European lenders.
Amid this blizzard of letters and digits, the European Commission is pushing ahead on yet another front. It is urging governments and the European Parliament to complete the EU’s banking union by 2019 and thus cut the “doom loop”, in which weak banks and sovereigns drag each other down. Because regulators treat all euro-area government bonds, regardless of origin, as risk-free, banks have an incentive to load up on them in order to economise on equity; and they favour their home governments’ bonds. Should the sovereign-bond prices fall, as they did in Greece, local banks take a big hit; if governments have to prop up lenders, the spiral goes on down.
Much has already been done to weaken this link. A single supervisor, housed in the European Central Bank (ECB), watches over the euro zone’s biggest lenders. A single resolution board, backed by a central fund, deals with failing banks. Yet the banking union is only half-built. The zone’s economic bounceback might well make its completion seem less urgent (see Free exchange). But waiting for the next financial crisis to strike would be the greater folly.
One big missing piece is a common European deposit-insurance scheme. Germans and other northerners have balked at the thought of bailing out supposedly feckless southerners. To allay such fears, the commission wants to go gradually: at first, should depositors have to be made good, a European insurance fund would merely lend money to national schemes, which would then be recovered from other banks.
Northerners will remain suspicious. That makes two other elements of the commission’s plan essential complements to deposit insurance. One is to bulk up banks’ shock absorbers, most likely with convertible debt, so that they can withstand heavy losses. The other is to tackle the piles of non-performing loans that, though shrinking, still weigh down lenders in Italy and other southern countries. That requires speeding up and harmonising procedures for insolvency and recovering collateral. The commission and the ECB are also working on rules for prompter recognition of duff loans in future.
All that makes sense but, to sever the doom loop, the commission wants to go further. It is looking at an ingenious scheme, first proposed by a team of European economists, to create securities backed by a pool of sovereign bonds. The safest tranches would be the riskless asset, free of nationality, that the euro area currently lacks.
Cut the cord
Though worth pursuing, the transition to the safe asset would be tortuous. After purchases to back the asset, the markets for some government bonds will end up being rather thin. Germans may suspect that they will remain the ultimate guarantor. Other means of strengthening Europe’s banks therefore remain vital. Consolidation, both within and across borders, would help. Europe has too many small banks; even its biggest lack scale. And many academics believe that banks everywhere should add still more equity to their balance-sheets.Completing the banking union is necessary for financial stability. It is not sufficient.
释义（只解释在文章的意思):
1. Start to bite （价格）开始回升，（措施，效果）开始显现
2. draw up 草拟，起草
3. take a (big ) hit: to suffer damage or loss, 遭到巨大冲击
4. prop up 支持，支撑 prop up on/ against
5. bail out: to do something to help someone out of trouble, special financial problems.
bail sb out 保释某人
6. bulk up: if someone or something bulks up or bulks out, they become bigger or heavier. 使加大（或加厚）
7. non-performing loans 不良贷款
8. duff loans 不良贷款，坏账
9. balance sheet 资产负债表
10. on the verge of: at the point when something is about to happen or is very likely to happen.
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