The crisis has shown that Europe’s one-legged bank-based financial system could do with another fully developed leg – market-based finance. Doing away with the impediments that hamper the full integration of European capital markets is key not only to diversifying sources of funding in a crisis, but also to strengthening the risk-sharing arrangements a monetary union requires.
By the same token, the regulatory gaps that still amount to implicit subsidies for banks must be removed once and all without allowing the emergence of unregulated systemic entities elsewhere. Banks provide important services to society, and many banks do not deserve the reputation the banking industry has gained during the crisis.