Abstract

From 2009 to 2012, Eurozone policy-makers addressed the sovereign debt crisis by focusing their attention on the issues of national fiscal discipline and macro-economic imbalances. The recognition that supranational institutions for banking policy were essential to eliminate a source of sovereign distress emerged after only several years of crisis management. Some may attribute this slow reaction to the protection of national interests. Beyond banking nationalism, however, dominant policy ideas needed time to adjust and view cross-border bank capital flows not just as indicators of economic efficiency but also as causal factors of financial risk.