Bank Resolution in Europe: The Unfinished Agenda of Structural Reform

29 Pages Posted: 13 Jan 2015 Last revised: 11 Mar 2015

See all articles by Jeffrey N. Gordon

Jeffrey N. Gordon

Columbia Law School; European Corporate Governance Institute (ECGI)

Wolf-Georg Ringe

University of Hamburg - Institute of Law & Economics; University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: January 11, 2015

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.

Keywords: bank resolution, bank structural regulation, single point of entry, bank holding company

JEL Classification: G21, G33, K20

Suggested Citation

Gordon, Jeffrey N. and Ringe, Wolf-Georg, Bank Resolution in Europe: The Unfinished Agenda of Structural Reform (January 11, 2015). Danny Busch & Guido Ferrarini (eds.), The European Banking Union (2015, Forthcoming); European Corporate Governance Institute (ECGI) - Law Working Paper No. 282/2015; Columbia Law and Economics Working Paper No. 507; Oxford Legal Studies Research Paper No. 4/2015. Available at SSRN: https://ssrn.com/abstract=2548251 or http://dx.doi.org/10.2139/ssrn.2548251

Jeffrey N. Gordon

Columbia Law School ( email )

435 West 116th Street
Ctr. for Law and Economic Studies
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European Corporate Governance Institute (ECGI)

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Belgium

HOME PAGE: http://www.ecgi.org

Wolf-Georg Ringe (Contact Author)

University of Hamburg - Institute of Law & Economics ( email )

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Germany
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+49 40 42838 6794 (Fax)

HOME PAGE: http://www.ile-hamburg.de

University of Oxford - Faculty of Law

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HOME PAGE: http://www.law.ox.ac.uk/people/wolf-georg-ringe

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://ecgi.global/users/wolf-georg-ringe

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