A Note on the Adequacy of the EU Scheme for Bank Recovery, Resolution and Deposit Insurance in Spain
Journal of Banking Regulation, 2016, 17, 4, 332–337
8 Pages Posted: 28 Dec 2014 Last revised: 6 May 2018
Date Written: November 11, 2015
This paper analyzes whether the funds set by the recent EU directives on bank resolution and deposit insurance to create a safer and sounder financial sector (i.e., 1% and 0.8% of covered deposits, respectively) are adequate to cover unexpected losses for the Spanish banking system. By applying a framework based on the foundation internal ratings-based (FIRB) approach established in Basel Capital Accords, we find that the fixed target levels proposed by the EU bank rules would not ensure the highest credit quality for a resolution and deposit insurance Fund (BRDIF) in Spain. Nevertheless, these resources would be sufficient to ensure a good solvency level for the Fund, equivalent to an AA S&P rating in 2013.
Keywords: deposit insurance system; European banking system; capital adequacy; internal ratings-based approach
JEL Classification: G21; G22; G28
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