• Linkedin
  • Twitter

Bank resolution, the need to recognize reality in order to prepare for the next crisis

Author(s): Jesper Berg, Henrik Bjerre-Nielsen

Date published: Jan 2020

SUERF Policy Note, Issue No 126
by Jesper Berg and Henrik Bjerre-Nielsen

JEL-codes: G21, G28.
Keywords: Banks, depository institutions, government policy and regulation.

The financial crisis has led to a near universal cry that never again shall a banker land on a taxpayer. In the EU, this objective has been enshrined in The Bank Recovery and Resolution Directive (BRRD), which member countries were supposed to implement as of January 1, 2015. The BRRD is an impressive piece of legislation that prescribes bail in of creditors rather than bail out by taxpayers as a preferred resolution strategy. However, it is obvious today that full implementation at this moment, including bail-in of senior creditors, not to mention unguaranteed depositors, in many countries is neither politically nor economically feasible. Rather than compromising on the end objectives, we suggest that the differences in the situation of individual countries and banks today is recognized, and each country develop individual plans for every bank in their country in order to maximize the likelihood that the EU will be prepared, when the next crisis comes along. This also reflects a more general view that the EU is more likely to progress in a harmonious manner, if there is due consideration of individual circumstances, as opposed to a process where standards are imposed without such consideration. The revision to BRRD, the so-called BRRD-2, unfortunately represent steps in the wrong direction in a number of areas.

Read Full Text

SUERF Policy Note, Issue No 126SUERF Policy Note, Issue No 126

0Web version: Bank resolution, the need to recognize reality in order to prepare for the next crisis

© SUERF - The European Money and Finance Forum 2010-2018 .:. Société Universitaire Européenne de Recherches Financières

Privacy Policy .:. Legal notice

Design by draganmarkovic.net