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International Environment: Recovery and Resolution Regimes as the Pillar of the Banking Union

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  • Festić Mejra

    (University of Maribor, Faculty of Economics and Business, Slovenia)

Abstract

The purpose of the article is to present the possible regimes of bank resolution in the euro system and to highlight open questions concerning additional capital buffers and the valuation of assets according to the Bank Recovery and Resolution Directive (BRRD). The bail-in tool is used to write down or to convert certain liabilities with the purpose of restoring the capital adequacy. The valuation exercise would determine the amount of loss absorbtion to restore viability of the institution and capital adequacy. The bridge bank tool offers deeper restructuring powers to the competent resolution authority. Sale of the business tool is actually a variation of the bridge bank tool, enabling the resolution authority to transfer assets and liabilities to investors. The asset separation tool always is combined with another tool. The write-down is not a resolution tool, as it affects equity, while a bail-in tool goes further to other subordinated debt and senior debt. It is possible to establish additional resolution tools in the national legislation, as long as these tools are compatible with the principles of directive and national legislation in order to support cross-border group resolution. The issue of bank overregulation and the ability to meet the requirements without negative effects on the economy is emphasized.

Suggested Citation

  • 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.
    • Handle: RePEc:vrs:ngooec:v:65:y:2019:i:2:p:30-40:n:4
    DOI: 10.2478/ngoe-2019-0009
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    More about this item

    Keywords

    recovery and resolution regimes; bridge bank; sale of business; asset separation tool; bail-in; regulation;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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