Durchsetzung von Marktdisziplin mittels zwangsweiser Übertragung systemrelevanter Teile von Banken? / The Enforcement of Market Discipline through a Transfer of Systemic Functions in Banks

Binder Jens-Hinrich

ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, 2013, vol. 64, issue 1, 377-404

Abstract: Already prior to the global financial crisis since 2007, the transfer of assets and liabilities from insolvent banks to private sector purchasers or “bridge banks” (established and funded by public authorities) has been developed, and promoted, as a functional substitute for more traditional approaches to bank insolvency management by policymakers in a number of jurisdictions and international standard-setting bodies. In response to lessons learnt from the crisis, the concept has now become widely accepted as international best practice and, indeed, forms part of the innovative “toolbox” for bank resolution provided for by the proposed EU Bank Recovery and Resolution Directive. The present article critically evaluates the concept in view of the functional objec tives of insolvency law generally and its technical implications. Specifically, it analyses whether transfer mechanisms can facilitate the participation of bank owners and bank creditors in the losses arising from bank insolvency, and thus help to foster market discipline while minimising externalities for the taxpayer even in the case of large, complex, internationally connected banks and banking groups. It argues that, jointly with other measures, including a “bail-in” of uninsured creditors, the mechanism could indeed yield positive results with regard to the incentive structure of some of the relevant actors, but faces severe practical obstacles that could compromise the effective application of the concept in particular in very large and complex cases for the time being.

Date: 2013
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DOI: 10.1515/ordo-2013-0118

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