Rescue by Regulation? Key Points of the Liikanen Report

Publication: White Paper No. 9
Topic Area: Financial Institutions
Authors: Jan Pieter Krahnen
Date: Oct 2013
Keywords: Liikanen Commission, Bail-in, Banking Separation, Banking Union
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.

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