Juridical and financial considerations on the public re capitalisation and rescue of financial institutions during periods of financial crises (Part I)
AbstractAs well as a consideration of why the lender of last resort facility should be used for emergency situations and systemically relevant institutions in particular, an interesting point which will be considered in this paper is the comparison between the European Central Bank (ECB) Recommendation and its application by the Commission in the Re capitalisation Communication, specifically with its Annex, where the Commission explains how it determines the price of equity (ordinary or common shares) - balancing the “real value” with the “market value” within a crisis context. Whether the Commission and Member States have applied this methodology in determining the price of equity with respect to the capital of banks acquired by Member States, will also be addressed. Such consideration could provide a vital key to determining the real value of State Aid and the best possible price for which capital could be sold. Given the scale of government intervention and State rescues which occurred during the recent crisis – as well as the prominence accorded to measures aimed at preventing and limiting distortions of competition, calls have been made for competition authorities to take on more formidable roles in designing and implementing exit strategies. In order to foster competition as much as possible, it is proposed that ”governments should provide financial institutions with incentives to prevent them from depending on government support once the economy begins to recover.”
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 24047.
Date of creation: 23 Jul 2010
Date of revision:
Financial Crisis; re capitalisation; guarantees; Troubled Asset Relief Program (TARP); fundamentally sound institutions; rescues.;
Other versions of this item:
- Ojo, Marianne, 2011. "Juridical and financial considerations on the public recapitalisation and rescue of financial institutions during periods of financial crises (Part II)," MPRA Paper 33265, University Library of Munich, Germany.
- Ojo, Marianne & Rodríguez-Miguez, Jose, 2010. "Juridical and financial considerations on the public re capitalisation and rescue of financial institutions during periods of financial crises (Part I)," MPRA Paper 49198, University Library of Munich, Germany.
- Ojo, Marianne & Rodríguez-Miguez, Jose, 2010. "Juridical and financial considerations on the public re capitalisation and rescue of financial institutions during periods of financial crises (Part I)," MPRA Paper 24344, University Library of Munich, Germany, revised 10 Aug 2010.
- K2 - Law and Economics - - Regulation and Business Law
- G2 - Financial Economics - - Financial Institutions and Services
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- D4 - Microeconomics - - Market Structure and Pricing
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-07-31 (Accounting & Auditing)
- NEP-ALL-2010-07-31 (All new papers)
- NEP-LAW-2010-07-31 (Law & Economics)
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.:
- Marianne Ojo, 2010.
"Liquidity Assistance and the Provision of State Aid to Financial Institutions,"
Journal of Advanced Research in Law and Economics,
ASERS Publishing, vol. 0(2), pages 137 - 157, December.
- Ojo, Marianne, 2010. "Liquidity assistance and the provision of state aid to financial institutions," MPRA Paper 23523, University Library of Munich, Germany.
- Takeo Hoshi & Anil K Kashyap, 2008.
"Will the U.S. Bank Recapitalization Succeed? Eight Lessons from Japan,"
NBER Working Papers
14401, National Bureau of Economic Research, Inc.
- Hoshi, Takeo & Kashyap, Anil K, 2010. "Will the U.S. bank recapitalization succeed? Eight lessons from Japan," Journal of Financial Economics, Elsevier, vol. 97(3), pages 398-417, September.
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