This MEDPRO Policy Paper examines the trends and prospects in financial-sector development and integration in the southern and eastern Mediterranean countries and concludes with an agenda for a long-term sustainable transition where finance turns to be a positive stimulus to long-term growth.

Rym Ayadi is Senior Research Fellow at the Centre for European Policy Studies (CEPS) in Brussels and Coordinator of the MEDPRO project.

After a week in which Cypriot politicians reassured people that their deposits were safe, followed by the announcement of a bank levy on savings, then a rush to withdraw cash amid general confusion and anxiety, Cypriot Senior Researcher Leonor Coutinho argues that in the case of a banking crisis it is vital for policy-makers to treat communication as an important component of the policy toolkit.

Leonor Coutinho is Senior Researcher at Europrism Research (Cyprus) and a Special Scientist at the University of Cyprus.

This paper aims at devising scenarios for the development of the financial system in the southern and eastern Mediterranean countries (SEMCs), for the 2030 horizon. The results of the simulations indicate that bank credit to the private sector, meta-efficiency and stock market turnover could reach at best 108%, 78% and 121%, respectively, if the SEMCs adopt the best practices in Europe. These scenarios are much higher than those of the present levels in the region but still lower than the best performers in Europe.

In this CEPS Commentary, the former Irish Prime Minister calls the precedents being set in the Cypriot banking case “troubling” and reflective of a lack of clarity and consistency of thought by both the eurozone Finance Ministers and the European Commission. He welcomes the rejection of the deal by the Cypriot Parliament as it now gives eurozone policy-makers a chance to think again about the underlying philosophy of their approach to the financial crisis.

Against a background of decades of regulatory reforms aimed at fostering integration, promoting competition, efficiency and productivity growth in the financial industry, both in developed and developing countries, in this MEDPRO Technical Report the authors seek to assess the outcomes of these reform processes on the dynamics of bank efficiency – via the estimation of stochastic meta-frontiers – and convergence for a large sample of countries over the period 1997-2010.

The European Parliament has probably won a Pyrrhic victory with its position on bank bonuses, argues CEPS CEO Karel Lannoo in this new Commentary. In return, EU member states got what they wanted with the new Capital Requirements Directive (CRD IV): no binding leverage ratio; mortgage risk weightings and capital add-ons to be determined by member states; and no obligatory consolidated capital position for bank-insurance companies. In other words, Banking Union will start out with capital rules that are more like Emmental cheese than a single rulebook.

Takeovers are one-off events, altering control and strategy within an organisation. But the chances of becoming the target of a bid, even where remote, daily influence corporate decision-making. Takeover rules are therefore central to company law and the balance of power among managers, shareholders and stakeholders alike. This study analyses the corporate governance drivers underpinning takeover bid regulations and assesses the implementation of the EU Directive on takeover bids and compares it with the legal framework of nine other major jurisdictions, including the US.

CEPS Senior Fellow Rym Ayadi contributed a chapter entitled “On the Role of the Basel Committee, the Basel Rules, and Banks’ Incentives” in the comprehensive Handbook of Safeguarding Global Financial Stability, edited by Gerard Caprio. The book explores the many forms of political and social forces exerting pressure on the globalised economy, from formal and informal policies to financial theories and technical models.

The Data Protection Regulation proposed by the European Commission contains important elements to facilitate and secure personal data flows within the Single Market. A harmonised level of protection of individual data is an important objective and all stakeholders have generally welcomed this basic principle. However, when putting the regulation proposal in the complex context in which it is to be implemented, some important issues are revealed. The proposal dictates how data is to be used, regardless of the operational context.

The ECMI Statistical Package represents a comprehensive collection of relevant data on the dynamics of various segments of the European capital markets, complete with graphical representations and explanatory commentary. It enables users to trace trends in European and global capital markets, so as to highlight their ongoing transformation through structural changes brought about by competitive forces, innovation, regulation or broader policy initiatives.

The ECMI Statistical Package represents a comprehensive collection of relevant data on the dynamics of various segments of the European capital markets, complete with graphical representations and explanatory commentary. It enables users to trace trends in European and global capital markets, so as to highlight their ongoing transformation through structural changes brought about by competitive forces, innovation, regulation or broader policy initiatives.

The ECRI Statistical Package on Consumer Credit in Europe is a collection of data on consumer credit, covering 38 countries: the 27 EU member states, three EU candidate countries (Croatia, Turkey and the Former Yugoslav Republic of Macedonia), the EFTA countries (Iceland, Liechtenstein, Norway and Switzerland) as well as four additional key global economies (the United States, Australia, Canada and Japan). Its purpose is to provide reliable statistical information allowing users to make meaningful comparisons between these countries.

CEPS Senior Fellow Rym Ayadi and CEPS researchers Emrah Arbak and Willem Pieter De Groen contributed chapter 8 on “Executive Compensation and Risk-taking in European Banking” in a comprehensive volume entitled Research Handbook on International Banking and Governance. Edited by James R. Barth, Chen Lin and Clas Wihlborg and published by Edward Elgar Publishing, the book explores how regulation, legislation, politics and other factors influence the governance of financial institutions and their behavior in different dimensions.

The euro area summit has managed to surprise the markets once again. By moving banking supervision of the eurozone to the European Central Bank, a huge step towards a more federal banking model has been taken, explains CEPS CEO Karel Lannoo in this new Commentary. But will this move be enough to re-establish confidence, bolster the euro interbank market and further financial integration?

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