Call for papers – conference on bank resolution mechanisms, Spring 2013

Call for Papers

Bank Resolution Mechanisms

A joint academic-practitioner conference with the theme Bank Resolution Mechanisms wil be held in Dublin, Ireland on Thursday May 23rd, 2013, organized by the Financial Mathematics and Computation Cluster (FMCC) at University College, Dublin and the Department of Economics, Finance & Accounting at National University of Ireland Maynooth.

There is deep and widespread dissatisfaction with the structure and performance of bank resolution mechanisms. This conference will present recent theoretical and empirical research and examine alternatives to current systems.  Possible presentation topics include:

* Contingent convertibility of bank liabilities: alternative specifications; contingent convertible bond pricing; the potential impact of contingent convertibility on banks’ cost of capital, capital structure and lending behaviour

* Bank resolution mechanisms within the European banking union

* Deposit insurance, no-bailout commitments and credible resolution mechanisms

* Network and liquidity externalities in bank failure

* Living wills for financial institutions

Please send papers or detailed proposals by March 29th, 2013 at the latest to; all papers must be submitted electronically in adobe pdf format. The academic coordinator for the conference is Gregory Connor, who can be contacted at There are no submission fees or attendance fees for the conference. We are grateful to the Science Foundation of Ireland and the Irish Institute of Bankers for their generous support of this conference. The Financial Mathematics and Computation Cluster is a collaboration between University College, Dublin, National University of Ireland Maynooth, Dublin City University and industry partners, with support from the Science Foundation of Ireland.

5 replies on “Call for papers – conference on bank resolution mechanisms, Spring 2013”

Would we be allowed to have our own resolution scheme given how we’ve been treated by the ECB/EC? Or would the treat of wiping out all our banks be used?

Presumably this crisis will end at some stage. It would be great to get in a bank resolution scheme in time for the following breakdown because it’s going to be the real enchilada.

Well done to Gregory Connor et al for organising this.

It is quite possible that at some stage Germany and others will only hand over money if banks are put through a rigorous resolution process.

Two particular problems with bank resolution:

1. How can we eliminate the time/delay in drafting and enacting legislation to implement any scheme?

1b. In this regard, could we give the Minister/Central Bank sweeping powers subject to certain general principles?

2. How can we deal pre-emptively with banks which claim solvency and where it will take some time to prove or ascertain whether they are actually insolvent as suspected?

2a. In such circumstances, how do we motivate banks to rapidly ascertain solvency and get back to normal trading as a new restructured entity rather than delaying and exploiting their semi-dominant position in a dysfunctional market to rebuild capital slowly?

3. How can we give the common weal and the general economy primacy over the narrow interests of official lenders (incl State itself and Central Bank) and large creditors? How do we remove the “veto” which these state institutions hold and how should the state be protected in this context, i.e. should the Department of Finance or the Central Bank have the final say?


The need for a cross-euro system makes the problme much more difficult. Consider for example that Spanish banks are currently actively (legally and openly) repurchasing their common equity with their scarce cash resources despite their obvious need for … more equity! Eventually when the capital infusion from the national/eurozone taxpayer eventually happens, the equity dilution of current shareholders will be offset by this irreversible cash release. Existing shareholders now are made better off at the expense of taxpayers later, since the taxpayers are forced to add more risk capital to shore up the banks. The cash paid for current shares is replaced by taxpayer cash. See the alphaville article

Not as scandalous as the Maple 10 share purchase scandal in Ireland (it is legal for banks to repurchase shares in Spain) but dubious in terms of corporate responsibility, and it shows how difficult it will be to have a cross-national Eurozone bank resolution regime.

I think

1) Resolution of sub bonds needs to be a lot easier:
Some simple economic test that allows them be converted to equity

2) More finely gradated instruments are needed
The notion of either pure capital or liquidity doesn’t leave much wiggle room. So say a bank has 10% capital and 90% liquidity. I think making say 20 of the 90% “junior” would be interesting. That way investors could get more sophisticated options and we’d get better market info

3) Prof Lane’s ESBies proposal is germane here

4) Resolution shouldn’t be so much of a “shock”/one time event. Better secondary markets and information are needed on all the relevant instruments especially sub and senior debt. Onus should be on each bank to provide this publicly provide this info (in aggregate) in the intervening

5) Resolution needs to tie to executive pay and pension: simply put , it should cause executive’s loss.

6) Resolution should negatively impact those who mis-rated a bank, in this respect league tables of the ratings agencies would be useful – the BIS should compile such. Ultimately it would be nice were their fees partly tied to performance(via the Market)

7) At/after a resolution event: shareholders should immediately be given a vote on each member of the board of directors and ditto the senior management team

8) Investment is needed in core retail banking operations to make them more “industry standard” and thus amenable to rapid amalgamation post resolution (e.g. as result of M&A). Financial Regulators need to rate bank’s operations for (i) Robustness and (ii) Standardisation

Overall I don’t think insurance answers any resolution questions…deposit insurance or CDS just pass the parcel of risk assessment – and can cause obvious concentration problems (AIG) – they have a role, but the current thinking of say an FTT as a slush fund to cover failure: only serves to increase prospective risk taking….more work is needed upstream/at source before anyone can claim such as a good idea.

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