A Coasean Approach to Bank Resolution Policy in the Eurozone
AbstractThe Eurozone needs a bank resolution regime that can work across seventeen independent nations of diverse sizes with varying levels of financial development, limited fiscal coresponsibility, and with systemic instability induced by quick and low-cost deposit transfers across borders. We advocate a Coasean approach to bank resolution policy in the Eurozone, which emphasises clear and consistent contracts and makes explicit the public ownership of the externality costs of bank distress. A variety of resolution mechanisms are compared including bank debt holder bail-in, prompt corrective action, and contingent convertible bonds. We argue that the “dilute-in” of bank debt holders via contingent convertibility provides a clearer and simpler Coasean bargain for the Eurozone than the more conventional alternatives of debt holder bail-in or prompt corrective action.
Download InfoIf 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.
Bibliographic InfoPaper provided by Financial Markets Group in its series FMG Special Papers with number sp214.
Date of creation: Dec 2012
Date of revision:
Contact details of provider:
Web page: http://www.lse.ac.uk/fmg/
Other versions of this item:
- Gregory Connor & Brian O'Kelly, 2012. "A Coasean Approach to Bank Resolution Policy in the Eurozone," Economics, Finance and Accounting Department Working Paper Series n233-12.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
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.:
- Pennacchi, George G. & Vermaelen, Theo & Wolff, Christian C, 2010.
"Contingent Capital: The Case for COERCs,"
CEPR Discussion Papers
8028, C.E.P.R. Discussion Papers.
- Stephan Dieckmann & Thomas Plank, 2012. "Default Risk of Advanced Economies: An Empirical Analysis of Credit Default Swaps during the Financial Crisis," Review of Finance, European Finance Association, vol. 16(4), pages 903-934.
- Hal Varian, 1994.
"Coase Competition and Compensation,"
- Kenneth Spong, .
"Banking regulation : its purpose, implementation, and effects,"
Federal Reserve Bank of Kansas City, number 1994bria.
- Kenneth Spong, . "Banking regulation : its purposes, implementation, and effects," Monograph, Federal Reserve Bank of Kansas City, number 2000bria.
- Diamond, Douglas W & Dybvig, Philip H, 1983.
"Bank Runs, Deposit Insurance, and Liquidity,"
Journal of Political Economy,
University of Chicago Press, vol. 91(3), pages 401-19, June.
- Viral V. Acharya & Itamar Drechsler & Philipp Schnabl, 2011.
"A Pyrrhic Victory? - Bank Bailouts and Sovereign Credit Risk,"
NBER Working Papers
17136, National Bureau of Economic Research, Inc.
- Acharya, Viral V & Drechsler, Itamar & Schnabl, Philipp, 2011. "A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk," CEPR Discussion Papers 8679, C.E.P.R. Discussion Papers.
- Hal R. Varian, 1994.
"A Solution to the Problem of Externalities when Agents are Well-Informed},"
- Varian, Hal R, 1994. "A Solution to the Problem of Externalities When Agents Are Well-Informed," American Economic Review, American Economic Association, vol. 84(5), pages 1278-93, December.
- Varian, H,R., 1991. "A Solution to the Problem of Externalities when Agents are Well-Informed," Papers 10, Michigan - Center for Research on Economic & Social Theory.
- George M. von Furstenberg, 2011. "Concocting Marketable Cocos," Working Papers 222011, Hong Kong Institute for Monetary Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The FMG Administration).
If references are entirely missing, you can add them using this form.