Banks were at the centre of this process both in lending and borrowing countries. As we now know, these flows were not perfectly optimised by rational private agents. The minimalist institutional construction of the euro area lacked the tools to discourage these developments.
The official bodies that could – and perhaps should – have intervened more to prevent these developments were national supervisors both in lending and borrowing countries. Yet they lacked the perspective to do so and also the instruments to contain private capital flows that were considered to result from optimizing self-equilibrating markets.