Resolution Cross-Border Banking Crisis in the EU. A Legal Perspective on Burden Sharing

Any policy aimed at resolution of a banking crisis determines which constituents – depositors, creditors, shareholders, the banking industry, and society as a whole – eventually bear the costs associated with a banking crisis, thus giving rise to legitimacy and accountability concerns. Rather than what the recent financial crisis has engendered – mostly ad hoc reactions that socialize losses but not profits – what is required, this incisive analysis shows, is an equitable and viable resolution framework, based on burden sharing, enshrined in law, and designed to deal with bank failures in a way that balances private and public interests. The author explores the design, institutional framework, and practical functioning of such a legal regime under EU law. In the process she discusses such issues as the following:

+ the systemic risk of bank failure;

+ exit regimes for failing banks and banking groups;

+ difficulties produced by the increasing cross-border activities and interconnectedness of the banking sector;

+ resolution tools to minimize the losses of the official sector;

+ the role of various authorities in resolving failing banks;

+ the need for resolution authorities to have robust rules and a certain level of discretion;

+ the potential sources of resolution financing;

+ overcoming resistance to burden-sharing arrangements;

+ the integration potential and political drawbacks of the emerging Banking Union;

+ the deposit insurance responsibilities of Member States;

+ European Central Bank monetary policy operations as a burden-sharing mechanism; and

+ the geographic scope of resolution and burden-sharing regimes and implications for non-participating Member States and third countries.

Contents:

+ List of Abbreviations.
+ Acknowledgments.
+ Introduction.
+ CHAPTER 1 Setting the Stage.
+ CHAPTER 2 Conceptualizing Burden Sharing.
+ CHAPTER 3 Designing a Legal Regime for Bank Resolution.
+ CHAPTER 4 Burden Sharing in Practice.
+ CHAPTER 5 The Institutional Framework for Burden Sharing.
+ CHAPTER 6 Conclusions and Outlook.
+ Bibliography.
+ List of Court Rulings.
+ Index.