Effective Resolution of Banks: Problems and Solutions

Publication: White Paper No. 19
Topic Area: Financial Institutions
Authors: Günter Franke,
Jan Pieter Krahnen,
Thomas von Lüpke
Date: Sep 2014
Keywords: Bank Recovery and Resolution Directive (BRRD), Single Resolution Mechanism (SRM), Bail-in
Abstract:

This essay reviews a cornerstone of the European Banking Union project, the resolution of systemically important banks. The focus is on the inherent conflict between a possible intervention by resolution authorities, conditional on a crisis situation, and effective prevention prior to a crisis. Moreover, the paper discusses the rules for bail-in debt and conversion rules for different layers of debt. Finally, some organizational requirements to achieve effective resolution results will be analyzed.

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