EU FRAMEWORK FOR BANK RECOVERY AND RESOLUTION – ESCB CONTRIBUTION

This post was written by Philip Lane

The ESCB’s views are in this document.

2 Responses to “EU FRAMEWORK FOR BANK RECOVERY AND RESOLUTION – ESCB CONTRIBUTION”

  1. Gavin Kostick Says:

    “The ESCB believes there is a sound economic rationale for developing a debt write-down tool (bail-in) within the context of bank resolution. Its main purpose should be to efficiently enforce burden sharing within the private sector and avoid taxpayer support. It is essential, however, that the introduction of this tool should follow closely the solution adopted in the context of the FSB [Financial Stability Board].” P.18

    That’s nice and clear. There is a ’sound economic rationale’ in creating a system which avoids ‘taxpayer support’.

    As part of a long slow, slog, approach, it is conceivable that the euro-zone area will get to a position where the new system is in place, and thus taxpayers are protected, and Ireland stands alone as the single country where the taxpayers have lost out massively due to an international banking collapse.

    There’s some traction here for an ongoing argument that such an outcome is inequitable and unjust.

  2. Karl Whelan Says:

    @ GK

    “There’s some traction here for an ongoing argument that such an outcome is inequitable and unjust.”

    You’d think so, wouldn’t you. I certainly argued so in the case of Anglo and INBS here http://www.karlwhelan.com/Papers/Whelan_Mar11.pdf

    However, note that there wasn’t a peep out of the government about Anglo bondholders yesterday. And not a mention on RTE about Anglo bondholders. The whole story got buried relative to the high profile coverage for the subdebt offers.

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