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The New European Recovery And Resolution Framework

Author

Listed:
  • Ionut Mircea

    (Romanian Academy National Institute for Economic Research “Costin C. Kiritescu”)

Abstract

The Bank Recovery and Resolution Directive define a common set of rules to establish when and how the authorities should intervene to stabilize troubled banks. It establishes the principle that shareholders and creditors are the first to bear the losses of a failing bank, before authorities and taxpayers. This addresses the moral hazard, increasing the market discipline of banks and limiting the risks they are taking. The Directive introduces also the concept no creditor worse off to protect the shareholders and creditors. It is also provided a framework for orderly resolution, even for banks operating across borders. The gradual mutualisation of the resolution scheme requires political compromises that have not been achieved yet and there cannot be a banking union without a mutualisation.

Suggested Citation

  • Ionut Mircea, 2015. "The New European Recovery And Resolution Framework," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 2(43), pages 322-331.
    • Handle: RePEc:aio:aucsse:v:2:y:2015:i:43:p:322-331
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    File URL: http://feaa.ucv.ro/AUCSSE/0043v2-029.pdf
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    More about this item

    Keywords

    banking system; risks; depositors; financial crisis; resolution and recovery;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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