Early intervention and prompt corrective action in Europe
The present crisis has revealed that, as expected, much of the safety net for handling failures in the banking system is deficient, particularly for cross-border banks, and the present problems had to be handled by a range of ad hoc measures. The principal new measure that needs to be undertaken in most countries is the implementation of a satisfactory special resolution regime for banks. This paper, however, deals with two further steps that could assist the operation of the safety net. The first is to ensure earlier intervention so there is more time to put a satisfactory rescue or resolution in place. The second is to implement a regime of prompt corrective action (structured early intervention and resolution, SEIR) so that both supervisors and banks know that a regime of increasing intensity will take place according to a strict timetable that will end in the authorities stepping into the bank while it still has positive capital, if the earlier stages are not effective. The paper evaluates the means of doing this in a European environment making use of the experience in the United States. It concludes that, while a lot can be done even within the current framework of national supervision, particularly through pre-positioning, cross-border banks can be better treated either by revising the home-host responsibilities or by moving to a supranational level of responsibility for SEIR for those banks whose continued operation is considered necessary for financial stability in any member state.
|Date of creation:||11 Aug 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.suomenpankki.fi/en/
More information through EDIRC
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.:
- Joe Peek & Eric S. Rosengren, 1996.
"Will legislated early intervention prevent the next banking crisis?,"
96-5, Federal Reserve Bank of Boston.
- Joe Peek & Eric S. Rosengren, 1996. "Will Legislated Early Intervention Prevent the Next Banking Crisis?," Boston College Working Papers in Economics 359, Boston College Department of Economics.
- Davis, E. Philip & Karim, Dilruba, 2008. "Comparing early warning systems for banking crises," Journal of Financial Stability, Elsevier, vol. 4(2), pages 89-120, June.
- 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.
- de Bandt, Olivier & Hartmann, Philipp, 2000.
"Systemic Risk: A Survey,"
CEPR Discussion Papers
2634, C.E.P.R. Discussion Papers.
- David T. Llewellyn & David G. Mayes, 2004.
"The role of market discipline in handling problem banks,"
- Llewellyn, David T. & Mayes , David G., 2003. "The role of market discipline in handling problem banks," Research Discussion Papers 21/2003, Bank of Finland.
- David G. Mayes & María J. Nieto & Larry Wall, 2008.
"Multiple safety net regulators and agency problems in the EU: Is Prompt Corrective Action partly the solution?,"
Banco de Espa�a Working Papers
0819, Banco de Espa�a.
- Mayes, David G. & Nieto, María J. & Wall, Larry, 2008. "Multiple safety net regulators and agency problems in the EU: Is Prompt Corrective Action partly the solution?," Journal of Financial Stability, Elsevier, vol. 4(3), pages 232-257, September.
- Mayes, David G., 2004. "Who pays for bank insolvency?," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 515-551, April.
- Douglas D. Evanoff & Larry D. Wall, 2003.
"Subordinated debt and prompt corrective regulatory action,"
Working Paper Series
WP-03-03, Federal Reserve Bank of Chicago.
- Douglas D. Evanoff & Larry D. Wall, 2002. "Subordinated debt and prompt corrective regulatory action," Working Paper 2002-18, Federal Reserve Bank of Atlanta.
When requesting a correction, please mention this item's handle: RePEc:hhs:bofrdp:2009_017. 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: (Minna Nyman)
If references are entirely missing, you can add them using this form.