Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149987
Authors: 
Götz, Martin
Krahnen, Jan Pieter
Tröger, Tobias
Year of Publication: 
2017
Series/Report no.: 
SAFE Policy Letter 54
Abstract: 
According to the Bank Recovery and Resolution Directive (BRRD), introduced as a lesson from the recent financial crisis, the losses a failing bank incurred should generally be borne by its investors. Before a minimum bail-in has occurred, government money can only be injected in emergency cas-es to remedy a serious disturbance in the economy and to preserve financial stability. This policy letter argues that in case of the Italian Bank Monte dei Paschi di Siena (MPS), which the Italian gov-ernment currently plans to bail out, a resolution would most likely not cause such a systemic event. A bailout contrary to the existing rules will lead to a mispricing of bank capital and retard the re-structuring of the European banking sector, the authors write. They appeal to the European Central Bank, the Systemic Risk Board and the EU Commission to follow the rules as the test-case MPS will have a direct impact on the credibility of the new BRRD regime and the responsible institutions.
Subjects: 
BRRD
banking resolution
banking supervision
SRM
financial stability
systemic risk
Document Type: 
Research Report

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