Banks and shadow banks, reform of the EU crisis management framework, money and the digital euro: an overview of perspectives and challenges

This paper deals with the issues of financial stability and the complex institutional/operational design to manage banking crises. Specific reference is made to the EU proposed reform of the CMDI. Suggestions are offered to overhaul the framework, also with a view to preserving the viability of small and medium-sized banks, whose demise characterized the Euro area in the past ten years. Attention is focused on the IPS, currently under threat. More generally, attention is drawn to the vulnerabilities and risks of the rapid growth of the shadow banking system, which accounts now for 50 per cent of global financial assets, as against 25 per cent ten years ago. The potential for peril arises from many concurrent factors, notably contagion risks. The intertwining and amplification of economic and financial stress are also the reflection of the rapid pace of technological and digital innovation. The new system will be characterized by the presence of CBDCs, in particular the digital Euro. The perspective changes in the institutional architecture represent a crucial facet of the complex transfer process under way of real, monetary, and financial activities to the Infosphere.