Too complex to work: a critical assessment of the bail-in tool under the european bank recovery and resolution regime

This paper analyses the bail-in tool under the BRRD and predicts that it will not reach its policy objective. To make this argument, this paper first describes the policy rationale that calls for mandatory PSI. From this
This paper analyses the bail-in tool under the BRRD and predicts that it will not reach its policy objective. To make this argument, this paper first describes the policy rationale that calls for mandatory PSI. From this analysis the key features for an effective bail-in tool can be derived. These insights serve as the background to make the case that the European resolution framework is likely ineffective in establishing adequate market discipline through risk-reflecting prices for bank capital. The main reason for this lies in the avoidable embeddedness of the BRRD’s bail-in tool in the much broader resolution process which entails ample discretion of the authorities also in forcing private sector involvement. Finally, this paper synthesized the prior analysis by putting forward an alternative regulatory approach that seeks to disentangle private sector involvement as a precondition for effective bank-resolution as much as possible form the resolution process as such. 
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Metadaten
Author:Tobias Tröger
URN:urn:nbn:de:hebis:30:3-444475
URL:https://ssrn.com/abstract=3023184
Parent Title (English):SAFE working paper series ; No. 179
Series (Serial Number):SAFE working paper series (179)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2017
Year of first Publication:2017
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2017/08/29
Tag:bail-in; cross-border insolvency; market discipline; precautionary recapitalization; private sector involvement
Issue:August 20, 2017
Pagenumber:33
HeBIS PPN:416433154
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:G01 Financial Crises (Updated!)
G18 Government Policy and Regulation
G21 Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G28 Government Policy and Regulation
K22 Corporation and Securities Law
K23 Regulated Industries and Administrative Law
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht

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