Law & Economics of Banks Corporate Governance in the Bail-In Era

45 Pages Posted: 12 Jan 2018

See all articles by Edoardo D. Martino

Edoardo D. Martino

University of Amsterdam; European Banking Institute

Date Written: January 12, 2018

Abstract

The paper aims at introducing an in-depth analysis of Banks Corporate Governance in the after-crisis regulatory environment, going through theoretical and methodological specifications for starting an economic analysis of the post-crisis stream of reforms in the financial system, especially in the Eurozone.

In a nutshell, this research has two main purposes: on the one hand, assess whether departures from standard corporate governance paradigms in banks are desirable; on the other hand, shed light on the impact of the rules on the resolution of distressed institutions on governance mechanisms.

To achieve those goals, the paper carries out a survey the literature about Bank Governance and Bail-in Regulation in a functional manner to introduce the unexplored link between the new resolution regime and Corporate Governance, focusing the governance role of bail-inable creditors, as “potential residual claimers”. The literature review is supplemented and enriched by the necessary theoretical tools to properly set a Law & Economic analysis, both for what concerns specific agency relationships between corporate constituencies and the nature of financial regulation and bank insolvency.

The paper concludes that the after-crisis reforms, and the bail-in regulation, in particular, represent the cornerstone for a new understanding of the relationship between corporate constituencies of banks. Moreover, the links between governance-related issues and the effectiveness of resolution mechanisms constitute a solid argument in favor of a positive role of Corporate Governance in addressing individual as well as systemic stability issues.

Keywords: Law & Finance; European Banking Union; Bail-in; Financial Regulation; Corporate Governance; Agency Theory

JEL Classification: G28; G34; K22

Suggested Citation

Martino, Edoardo D., Law & Economics of Banks Corporate Governance in the Bail-In Era (January 12, 2018). Available at SSRN: https://ssrn.com/abstract=3100703 or http://dx.doi.org/10.2139/ssrn.3100703

Edoardo D. Martino (Contact Author)

University of Amsterdam ( email )

Roetersstraat 11
NE 1018 WB
Amsterdam, 1018 WB
Netherlands

European Banking Institute ( email )

Frankfurt
Germany

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