IDEAS home Printed from https://ideas.repec.org/p/eps/cepswp/9279.html
   My bibliography  Save this paper

Bail-in Provisions in State Aid and Resolution Procedures: Are they consistent with systemic stability?

Author

Listed:
  • Micossi, Stefano
  • Bruzzone, Ginevra
  • Cassella, Miriam

Abstract

This CEPS Policy Brief examines the provisions for bail-in in the European Union � that is, the principle whereby any public measure to recapitalise a bank with insufficient prudential capital must be preceded by a write-down or conversion into equity of creditors� claims � in state aid policies and in the new resolution framework for failing banks, with two aims: i) to assess whether and how they are coordinated and ii) more importantly, whether they address satisfactorily the question of systemic stability that may arise when investors fear that creditors� claims are likely to be bailed-in in a bank crisis. The issue is especially relevant in the present context, as the comprehensive assessment exercise underway for EU banks falling under the direct supervision of the European Central Bank may lead supervisors to require substantial capital injections simultaneously for many of the banks involved, possibly shaking investors� confidence across EU banking markets. The authors conclude that the two sets of rules are, broadly speaking, mutually consistent and that they already contain sufficient safeguards to address systemic stability concerns. However, the balance of the elements underpinning the European Commission�s decisions in individual cases may not be clear to bank creditors and potential investors in financial markets. The impression of unneeded rigidity on this very sensitive issue has been heightened by official statements over-emphasising that each case will be assessed individually under competition rules, thus feeding the concern that the systemic dimension of the issue may have been underestimated. Therefore, further clarification by the Commission may be needed on how the various criteria will be applied during the ongoing transition to banking union � perhaps through a new communication completing the state aid framework for banks in view of the adoption of the new resolution rules.

Suggested Citation

  • Micossi, Stefano & Bruzzone, Ginevra & Cassella, Miriam, 2014. "Bail-in Provisions in State Aid and Resolution Procedures: Are they consistent with systemic stability?," CEPS Papers 9279, Centre for European Policy Studies.
  • Handle: RePEc:eps:cepswp:9279
    as

    Download full text from publisher

    File URL: http://www.ceps.eu/system/files/PB%20318%20SM%20et%20al%20Bail-in%20Provisions%20in%20State%20Aid%20and%20Resolution%20Procedures%20final.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Micossi, Stefano & Bruzzone, Ginevra & Carmassi, Jacopo, 2013. "The New European Framework for Managing Bank Crises," CEPS Papers 8620, Centre for European Policy Studies.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Beck, Thorsten & Carletti, Elena & Goldstein, Itay, 2016. "Financial Regulation in Europe: Foundations and Challenges," CEPR Discussion Papers 11147, C.E.P.R. Discussion Papers.
    2. Goodhart, Charles & Avgouleas, Emilios, 2014. "A Critical Evaluation of Bail-in as a Bank Recapitalisation Mechanism," CEPR Discussion Papers 10065, C.E.P.R. Discussion Papers.
    3. Festić Mejra, 2019. "International Environment: Recovery and Resolution Regimes as the Pillar of the Banking Union," Naše gospodarstvo/Our economy, Sciendo, vol. 65(2), pages 30-40, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rainer Masera, 2014. "CRR/CRD IV: the trees and the forest," PSL Quarterly Review, Economia civile, vol. 67(271), pages 381-422.
    2. Tóth, József, 2015. "The Financial Background of the European Deposit Guarantee Schemes and the Resolution Mechanism," MPRA Paper 64794, University Library of Munich, Germany.
    3. Gai, Prasanna & Kemp, Malcolm & Sánchez Serrano, Antonio & Schnabel, Isabel, 2019. "Regulatory complexity and the quest for robust regulation," Report of the Advisory Scientific Committee 8, European Systemic Risk Board.
    4. Hans Geeroms & Pawel Karbownik, 2014. "A Monetary Union requires a Banking Union," Bruges European Economic Policy Briefings 33, European Economic Studies Department, College of Europe.
    5. Daniel Gros & Dirk Schoenmaker, 2014. "European Deposit Insurance and Resolution in the Banking Union," Journal of Common Market Studies, Wiley Blackwell, vol. 52(3), pages 529-546, May.
    6. Tóth, József, 2015. "Az európai betétbiztosítási és bankszanálási rendszerek jellemzői és azok finanszírozása [Characteristics of European deposit insurance and bank bailout systems and their financing]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 767-785.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eps:cepswp:9279. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Margarita Minkova (email available below). General contact details of provider: https://edirc.repec.org/data/cepssbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.