Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Insufficiency of Traditional Safety Nets: What Bank Resolution Fund for Europe?

Contents:

Author Info

  • Maria J. Nieto
  • Gillian G. Garcia
Registered author(s):

    Abstract

    This paper analyzes the rationale for Bank Recovery and Resolution Funds (BRRFs) in the context of the present European Union’s (EU) decentralized safety net. As compared to pure micro and macro prudential regulation, BRRF’s objective is to limit losses given financial institutions´ default while allowing for a balanced share of costs between private investors and tax payers. Most important, BRRFs contribute to shifting the government’s tradeoff between bailing out and restructuring in favor of restructuring, to the extent that there is also an effective bank resolution legal framework. In turn, banks´ contributions to BRRFs aim at discouraging their excess systemic risk creation particularly through financial system leverage. The paper makes some reflections on the governance aspects of BRRFs that would require minimum harmonization in the EU, emphasizing that BRRFs are only one institutional component of financial institutions´ effective and credible resolution regime. This paper focuses on depository institutions, but the rationale of BRRFs could be extended to other credit institutions.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.lse.ac.uk/fmg/workingPapers/specialPapers/PDF/SP209.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Financial Markets Group in its series FMG Special Papers with number sp209.

    as in new window
    Length:
    Date of creation: May 2012
    Date of revision:
    Handle: RePEc:fmg:fmgsps:sp209

    Contact details of provider:
    Web page: http://www.lse.ac.uk/fmg/

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Perotti, Enrico C & Ratnovski, Lev & Vlahu, Razvan, 2011. "Capital Regulation and Tail Risk," CEPR Discussion Papers 8526, C.E.P.R. Discussion Papers.
    2. Fabio Panetta & Thomas Faeh & Giuseppe Grande & Corrinne Ho & Michael King & Aviram Levy & Federico M. Signoretti & Marco Taboga & Andrea Zaghini, 2009. "An assessment of financial sector rescue programmes," Questioni di Economia e Finanza (Occasional Papers) 47, Bank of Italy, Economic Research and International Relations Area.
    3. Martin Cihák & Erlend Nier, 2009. "The Need for Special Resolution Regimes for Financial Institutions," IMF Working Papers 09/200, International Monetary Fund.
    4. Robert A. Eisenbeis & George G. Kaufman, 2007. "Cross-border banking: challenges for deposit insurance and financial stability in the European Union," Working Paper 2006-15, Federal Reserve Bank of Atlanta.
    5. Gillian G.H. Garcia & Rosa M. Lastra & María J. Nieto, 2009. "Bankruptcy and reorganization procedures for cross-border banks in the EU: Towards an integrated approach to the reform of the EU safety net," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 17(3), pages 240-276, July.
    6. Doluca, Hasan & Klüh, Ulrich & Wagner, Marco & Weder di Mauro, Beatrice, 2010. "Reducing systemic relevance: A proposal," Working Papers 04/2010, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    7. Adam Pawlikowski, 2005. "The Polish deposit insurance scheme compared to arrangements adopted in other EU countries," National Bank of Poland Working Papers 34, National Bank of Poland, Economic Institute.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:fmg:fmgsps:sp209. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The FMG Administration).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.