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The BIS hosts nine international organisations engaged in standard setting and the pursuit of financial stability through the Basel Process. This website requires javascript for proper use. About BIS The BIS's mission is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks. Read more about the BIS. Central bank hub The BIS facilitates dialogue, collaboration and information-sharing among central banks and other authorities that are responsible for promoting financial stability. Read more about our central bank hub. Statistics BIS statistics on the international financial system shed light on issues related to global financial stability. Read more about our statistics. Banking services The BIS offers a wide range of financial services to central banks and other official monetary authorities. Read more about our banking services.

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. Challenge Faced by Bank Regulator and Supervisor

The European debt crisis often also referred to as the eurozone crisis or the European sovereign debt crisis is a multi-year debt crisis that has been taking place in the European Union since the end of Several eurozone member states GreecePortugalIrelandSpain and Cyprus were unable to anr or refinance their government debt or to bail Challenge Faced by Bank Regulator and Supervisor over-indebted banks under their national supervision without the assistance of third parties like other eurozone countriesthe European Central Bank ECBor the International Monetary Fund IMF.

The eurozone crisis was caused by a balance-of-payments crisis a sudden stop of foreign capital into countries that had substantial deficits and were dependent on foreign lending. The crisis was worsened by the inability of states to resort to devaluation reductions in the value of the national currency. The European Central Bank adopted an interest rate that incentivized investors in Northern eurozone members to lend to the Bj, whereas the South was incentivized to borrow because interest rates were very low.

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Over time, this led to the accumulation of deficits in the South, primarily by private economic actors. In several countries, private debts arising from a property bubble were transferred to sovereign debt as a result of banking system bailouts and government responses to slowing economies post-bubble. European banks own a significant amount of sovereign debt, such that concerns regarding the solvency of banking systems or sovereigns are negatively reinforcing. The onset of crisis was in late when the Greek government disclosed that its budget deficits were far higher than previously thought. The ECB also contributed to solve the crisis by lowering interest rates and providing cheap loans of more than one trillion euro in order to maintain money flows between European banks.

Both Spain and Cyprus received rescue packages in June Return to economic growth and improved structural deficits enabled Ireland and Portugal to exit their bailout programmes in July Greece and Cyprus both managed to partly regain market access in Spain never officially received a bailout programme. Its rescue package from the ESM was earmarked Challenge Faced by Bank Regulator and Supervisor a bank recapitalisation fund and did not include financial support for the government itself. As such, it can be argued to have had a major political impact on the ruling governments in 10 out of 19 eurozone countries, contributing to power shifts in Greece, Ireland, France, Italy, Portugal, Spain, Slovenia, Slovakia, Belgium and the Netherlands, as well as outside of the eurozone, in the United Kingdom.

The eurozone crisis resulted from the structural problem of the eurozone and a combination of complex factors. There is a consensus that the root of the eurozone crisis lay in a balance-of-payments crisis a sudden stop of foreign capital into countries that were dependent on Challenge Faced by Bank Regulator and Supervisor lendingand that this crisis was worsened by the fact that states could not resort to devaluation reductions in the value of the national currency to make exports more competitive in foreign markets.

Macroeconomic divergence among eurozone member states led to imbalanced capital flows between the member states. Prior to the adoption of the euro, Southern eurozone member states grew rapidly with rising wages and prices whereas Northern eurozone members grew slowly. Despite these different macroeconomic conditions, the European Central Bank could only adopt one interest rate, choosing one that meant that real interest rates in Germany were high relative to inflation and low in Southern eurozone member states. This incentivized investors in Germany to lend to the South, whereas the South was incentivized to borrow because interest rates were very low.

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Bnk Eurozone member states could have alleviated the imbalances in capital flows and debt accumulation in the South by coordinating national fiscal policies. Germany could have adopted more expansionary fiscal policies to boost domestic demand and reduce the outflow of capital and Southern eurozone member states could have adopted more restrictive fiscal policies to curtail domestic demand and reduce borrowing from the North.

The crisis subsequently spread to Ireland and Portugal, while raising concerns about Italy, Spain, and the European banking system, and more fundamental imbalances within the eurozone. Fragmented financial regulation contributed to irresponsible lending in the years prior to the crisis. In the eurozone, each country had its own financial ajd, which allowed financial institutions to exploit gaps in monitoring and regulatory responsibility to resort to loans that were high-yield but very risky.

Harmonization or centralization in financial regulations could have alleviated the problem of risky loans. Another factor that incentivized risky financial transaction was that national governments could not credibly commit not to bailout financial institutions who Reggulator undertaken risky loans, thus causing a moral hazard problem. The European debt crisis erupted in the wake of the Great Recession around lateand was characterized by an environment of overly high government structural deficits and accelerating debt levels.]