Jan Pieter Krahnen, Program Director of the SAFE Policy Center, and Jörg Rocholl, President of the European School of Management and Technology (ESMT), present a compromise for the planned European bank resolution scheme (Single Resolution Mechanism (SRM)). In case of a bank resolution the liability for losses should first be allocated to a national fund. If losses exceed the national fund’s capacity, a European fund should come into play and provide additional funds up to a maximum amount. On the next layer the national budget should bear further losses which can be supported by the European Stability Mechanism (ESM) as a guarantor of last resort. This four-layer system ensures that, on the one hand, states are liable for their banks but, on the other hand, a European backstop is available if national funds are exhausted.
In its today’s issue, the German business daily “Handelsblatt” reported on the proposal by Krahnen and Rocholl: “Kompromiss für Bankenabwicklung – Finanzwissenschaftler schlagen eine Haftungskaskade vor“. The full proposal is available as SAFE White Paper No. 10.
