What happens if european banks fail

We see across borders. We compare banks across the euro area and spot common issues and risks earlier. So, for the first time ever, banks across the euro area are supervised according to the same high standards; they operate on a level supervisory playing field.

That helps us achieve our goal of making the banking sector safer. But it does more than that. It also helps to prepare the ground for a truly European banking market that will trigger cross-border consolidation sooner rather than later.

What we are striving for is a well-functioning market. And in a market economy, companies fail from time to time — that is as true for banks as it is for any other business.

Thus, while our job is to contribute to the safety and soundness of the banking system, we should not prevent each and every bank from failing. If a bank sticks to an unsustainable business model or takes unwise investment decisions it can get into trouble and might even fail. Failure is always painful but, in certain circumstances, it cannot be avoided. During the financial crisis, the market mechanisms did not work well. This blew enormous holes in government budgets and set all the wrong incentives for banks and investors.

Confident that they would be rescued if things went wrong, banks had an incentive to take on too much risk. Today, we have a European framework to resolve failing banks in an orderly manner and avoid disrupting the financial system. They earn the returns in good times; they also have to accept the losses in bad times. This protects taxpayers and exerts market discipline.

Banks must be aware that they might actually fail, so they should behave more responsibly and manage their risks more effectively. Group Subscription. Premium Digital access, plus: Convenient access for groups of users Integration with third party platforms and CRM systems Usage based pricing and volume discounts for multiple users Subscription management tools and usage reporting SAML-based single sign-on SSO Dedicated account and customer success teams.

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Or, if you are already a subscriber Sign in. Other options. Close drawer menu Financial Times International Edition. Search the FT Search. World Show more World. No UK banks failed although they are being subjected to fresh tests by the Bank of England which will publish the results on 16 December. In Greece, three banks failed the stress tests set by the European Banking Authority, the overarching European banking regulator, with the same number failing in Cyprus.

Twenty-four banks failed the examination.