Date published: Jan 2020
SUERF Policy Note, Issue No 126
by Jesper Berg and Henrik Bjerre-Nielsen
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