Hellenic Open University Conferences, International Conference on Business & Economics of the Hellenic Open University 2015

Font Size: 
The bail-in resolution tool under the EU Bank Recovery and Resolution Directive
Anna Olga Mitsou

Building: Titania
Room: Niki
Date: 2015-02-06 05:00 PM – 07:00 PM
Last modified: 2015-01-27

Abstract


With the adoption of Directive on Bank Recovery and Resolution (BRRD) and the Single Resolution Mechanism (SRM) Regulation, on 15 April 2014, the European Union has completed one of the three pillars for the creation of the “European Banking Union” for euro area Member States and other Member States willing to participate. The BRRD provides for the harmonization of substantive rules for the recovery and resolution of banks and investment firms, whereas the SRM Regulation draws upon the provisions of the BRRD and provides, furthermore, for a new centralized resolution authority for the Eurozone, the Single Resolution Mechanism Board (the SRM Board) tasked to implement recovery and resolution plans and to resolve banks and for a Single Resolution Fund. The most powerful, yet contested, resolution instrument introduced by these two pieces of legislation is “bail-in” i.e. the participation of shareholders and creditors in the losses of the failing bank, prior to receiving any public financial support. This paper analyses the new concept of bail-in as introduced by the BRRD, the conditions for its use and effectiveness and discusses on its shortcomings and certain risks for the financial system this new resolution tool might pose.


Keywords


bail-in; resolution; Bank Recovery and Resolution Directive