EconPapers    
Economics at your fingertips  
 

Bank Crises: Continuing the Business, Protecting Investors

Lorenzo Stanghellini

Banca Impresa Società, 2018, issue 3, 421-444

Abstract: The economic and regulatory environment in which banking crises are handled has changed faster than the financial structure of the banks. In various countries, many shareholders and bondholders, including subordinate bondholders, are the bank's clients (including retail clients, often due to misselling). According to the new rules, investors should bear the cost of a bank's crisis, but their status as clients has made the prospect of successful bail-ins politically and factually very remote. Italy is no exception. This may generate pressure to escape from the new rules, on the one hand, and to resort to State aid, on the other. Given the current situation of overcapacity and the need to cut the number of banking branches, continuing the business of a bank that was resolved or liquidated via a sale of the business is motivated by the need to preserve financial stability, rather than by the goal of preserving value. Investors are compensated "ex post" through public schemes that bail-out subordinated bondholders (and, recently, even shareholders) from the consequences of burden sharing. A long and difficult transition will probably take place, a transition during which banks, and Italian banks in particular, will have to modify their liability structure, substituting bonds once sold to Italian families with costlier debt, to be financed through a low-margin banking business.

Keywords: Banks; Bank Resolution; Single Resolution Mechanism; Financial Stability; Bail-inable Debt. (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.rivisteweb.it/download/article/10.1435/92596 (application/pdf)
https://www.rivisteweb.it/doi/10.1435/92596 (text/html)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mul:jqmthn:doi:10.1435/92596:y:2018:i:3:p:421-444

Access Statistics for this article

More articles in Banca Impresa Società from Società editrice il Mulino
Bibliographic data for series maintained by ().

 
Page updated 2025-03-19
Handle: RePEc:mul:jqmthn:doi:10.1435/92596:y:2018:i:3:p:421-444