THE NEW EUROPEAN RECOVERY AND RESOLUTION FRAMEWORK

Ionut Mircea
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Ionut Mircea: Romanian Academy National Institute for Economic Research “Costin C. Kiritescu”

Annals of University of Craiova - Economic Sciences Series, 2015, vol. 2, issue 43, 322-331

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.

Keywords: banking system; risks; depositors; financial crisis; resolution and recovery (search for similar items in EconPapers)
JEL-codes: E58 E59 E60 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:aio:aucsse:v:2:y:2015:i:43:p:322-331

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