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The recent market turmoil: Lessons for market exits of systemically important banks

SUERF BAFFI Bocconi Panel Discussion

The recent market turmoil: Lessons for market exits of systemically important banks

Wednesday, 17 May 2023  I 14:00-15:30 CET I Online via Webex

The recent banking turmoil in the US and in CH has raised doubts on the functionality of the current framework of market exits for systemically important banks. On the one hand, the authorities managed recent market exits quickly with minimal repercussions on financial stability or the real economy. On the other hand, public funds were necessary to resolve the crises: central banks provided liquidity assistance loans beyond emergency liquidity assistance and the public provided, inter alia, default guarantees for these loans; deposit insurance was extended beyond the statutory limits.

In this panel discussion we aim to distill the lessons learnt for the framework of market exits of systemically important banks:

  • Why did authorities deem market exits without public funds – as originally intended – inadequate or too risky? Is this time inconsistency unavoidable or can the framework be fixed?
  • There are alternatives to resolution, such as regular bank taxes as price for (inevitable?) public bail-outs, a permanent “National Investment Authority” (© S. T. Omarova) that manages public stakes in bailed-out banks or their assets, or the break-up of banks that are too large to be resolved. What are their advantages and disadvantages?
  • Macroprudential supervision addresses the too big to fail-problem ex-ante. How should it interact with the market exit framework? How much equity and bail-inable debt would large banks have to hold to be resolvable? How can we ensure ex-ante that the write-down of equity and the bail-in of debt do not constitute a source of systemic risk propagation themselves?
Wednesday, 17 May 2023
14:00 Opening and welcome

Ernest Gnan, Secretary General, SUERF

14:05 Panel Discussion and Q&A with the audience

Moderation: Markus Schwaiger, Director, Department for Financial Stability, OeNB

Marie Donnay, Head of Unit – Fisma D3 Resolution and Deposit Insurance, European Commission
Presentation (pdf)Presentation (pdf)

Giles Edward, Sector Lead, European Financial Institutions, S&P Global Ratings
Presentation (pdf)Presentation (pdf)

Stefan W. Schmitz, Head of Macroprudential Supervision, OeNB

see also, SUERF Policy Note, Issue No 293: The EU macroprudential review should prioritize removing regulatory overlaps and increasing the flexibility of the CCyB

Rosa M Lastra, Sir John Lubbock Chair in Banking Law, Queen Mary University of London

Saule T. Omarova, Director, Jack Clarke Program on the Law and Regulation of Financial Institutions and Markets, Cornell University

15:30 End

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