We could trace a major part of the problems of the banking industry to the EU constitution. A big part of them are obvious, namely the relation between ECB and the finance system, the lack of regulation, etc, but I would like to take a closer look to the less obvious problems.



First, e usually consider 3 major markets in economy. Real Markets, Financial Markets and Currency Markets, and we say that if two of the markets are at equilibrium then the third will also be at equilibrium. With the Euro, by default the currency market isn't at equilibrium, and that by consequence makes that the financial isn't at equilibrium. Interest rates aren't formed in the market has lost its rating power.



Other less obvious fact is the subsidies policies, that led to bad risk pricing policies, and again the loss of the rating power by interest rates. We spend 20 years promoting projects that under efficient markets were never going to be funded, and now we are paying for it.



Third and last is the extensive use we make of banks financing corporations, leading to an anemic development of capital markets, namely commercial paper and bonds. We all knew that European banks were inefficient pricing risk, so corporate and individual behavior led to the capture of value from banks by undertaking risk projects at a much lower price.