Bank Resolution in Europe: The Unfinished Agenda of Structural Reform

Jeffery N. Gordon, Georg Ringe

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Abstract

This chapter argues that the work of the European Banking Union remains incomplete in one important respect, the structural re-organization of large European financial firms that would make “resolution” of a systemically important financial firm a credible alternative to bail-out or some other sort of taxpayer assistance. A holding company structure in which the public parent holds unsecured term debt sufficient to cover losses at an operating financial subsidiary would facilitate a “Single Point of Entry” resolution procedure that would minimize knock-on effects from the failure of a systemically important financial institution. Resolution through such a structure would minimize run risk from short term creditors and minimize destructive ring-fencing by national regulators. Although structural reform in the EU could be achieved by supervisory implementation of the “living wills” requirement for effective resolution or irresistible incentives through capital charges, it would be best obtained through addition to the EU’s Proposed Structural Measures Regulation now under consideration.
Original languageEnglish
Title of host publicationEuropean Banking Union
EditorsDanny Busch, Guido Ferrarini
Place of PublicationOxford
PublisherOxford University Press
Publication date2015
Pages500-523
Chapter15
ISBN (Print)9780198727309, 0198727305
Publication statusPublished - 2015

Cite this

N. Gordon, J., & Ringe, G. (2015). Bank Resolution in Europe: The Unfinished Agenda of Structural Reform. In D. Busch, & G. Ferrarini (Eds.), European Banking Union (pp. 500-523). Oxford: Oxford University Press.