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The interplay between large banks' prudential and resolution frameworks: do we need further improvements?

Author

Listed:
  • Maurizio Trapanese

    (Banca d'Italia)

  • Sabrina Bellacci

    (Banca d'Italia)

  • Marcello Bofondi

    (Banca d'Italia)

  • Giuseppe DE Martino

    (Banca d'Italia)

  • Sebastiano Laviola

    (Single Resolution Board)

  • Valerio Vacca

    (Banca d'Italia)

Abstract

This paper explains the essential features of the too-big-to-fail regulatory framework finalized after the financial crisis of 2007-08 and explores whether the current large banks' prudential and resolution frameworks work as originally intended and whether there is room for further improvements. The aim is to identify the policy areas whose effectiveness could be enhanced through a greater integration between the prudential and the resolution policies. We focus on the banks of the European Banking Union classified as significant. We find that there is a substantial integration between the prudential and resolution frameworks. However, some further improvements could be achieved with reference to: 1) the consistency between the assessments of a bank's systemic importance and its resolvability; 2) the coordination between the recovery and the resolution plans; 3) the interaction between capital buffers and minimum requirements; 4) the information sharing between the micro-prudential and resolution authorities and the macro-prudential ones. In developing our analysis, we make also reference to the recent episodes of banking crises and to the work under way at the international level to draw initial lessons from these episodes.

Suggested Citation

  • Maurizio Trapanese & Sabrina Bellacci & Marcello Bofondi & Giuseppe DE Martino & Sebastiano Laviola & Valerio Vacca, 2023. "The interplay between large banks' prudential and resolution frameworks: do we need further improvements?," Questioni di Economia e Finanza (Occasional Papers) 807, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_807_23
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    financial crises; banks; financial policy and regulation; crisis management JEL Classification: G01; G21; G28; H12;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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