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Rescue by regulation? Key points of the Liikanen report

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  • Krahnen, Jan Pieter

Abstract

This paper summarizes the key proposals of the report by the Liikanen Commission. It starts with an explanation of a crisis narrative underlying the Report and its proposals. The proposals aim for a revitalization of market discipline in financial markets. The two main structural proposals of the Liikanen Report are: first, for large banks, the separation of the trading business from other parts of the banking business (the Separation Proposal), and the mandatory issuing of subordinated bank debt thought to be liable (the strict Bail-in Proposal). The credibility of this commitment to private liability is achieved by strict holding restrictions. The anticipated consequences of the introduction of these structural regulations for the financial industry and markets are addressed in a concluding part.

Suggested Citation

  • Krahnen, Jan Pieter, 2013. "Rescue by regulation? Key points of the Liikanen report," SAFE White Paper Series 9, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewh:9
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    References listed on IDEAS

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    1. Calomiris, Charles W. & Herring, Richard J., 2011. "Why and How to Design a Contingent Convetible Debt Requirement," Working Papers 11-41, University of Pennsylvania, Wharton School, Weiss Center.
    2. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
    3. Raghuram G. Rajan, 2005. "Has financial development made the world riskier?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 313-369.
    4. Bluhm, Marcel & Krahnen, Jan Pieter, 2011. "Default risk in an interconnected banking system with endogeneous asset markets," CFS Working Paper Series 2011/19, Center for Financial Studies (CFS).
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    Cited by:

    1. Jan-Pieter Krahnen & Felix Noth & Ulrich Schüwer, 2017. "Structural Reforms in Banking: The Role of Trading," Journal of Financial Regulation, Oxford University Press, vol. 3(1), pages 66-88.
    2. Razvan STEFANESCU & Ramona DUMITRIU, 2014. "A State-Owned Payment And Savings System As An Alternative To The Banking Regulations Strengthening," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 297-301.
    3. Tobias Niedrig & Helmut Gründl, 2015. "The Effects of Contingent Convertible (CoCo) Bonds on Insurers’ Capital Requirements Under Solvency II," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 40(3), pages 416-443, July.
    4. Philippe Oster, 2020. "Contingent Convertible bond literature review: making everything and nothing possible?," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(4), pages 343-381, December.

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