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How to improve crisis management in the banking union: a European FDIC?

Author(s): Fernando Restoy

Date published: Sep 2019

SUERF Policy Note, Issue No 102
by Fernando Restoy, Bank for International Settlements

 

JEL-codes: G21, G28, K22.
Keywords: bank resolution, insolvency regimes, mid-sized banks, bail-in, EDIS.

The creation of the Single Resolution Mechanism has been a crucial step forward for the development of the banking union. Yet, the coexistence of a common regime for the resolution of systemic banks with a wide variety of – typically inefficient – national insolvency regimes for non-systemic institutions create significant obstacles for the adequate management of banking crises in the euro zone. In particular, the current regime fails to provide robust procedures for the management of the failure of mid-sized institutions and to break the link between banks and sovereigns. The policy note discusses the pros and cons of different options to address the current deficiencies and sketches the steps of a gradual establishment of a common FIDC-like insolvency regime for the banking union.

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SUERF Policy Note, Issue No 102SUERF Policy Note, Issue No 102

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