The Choice between Judicial and Administrative Sanctioned Procedures to Manage Liquidation of Banks: A Transatlantic Perspective

Binder, Jens-Hinrich; Krimminger, Michael; Nieto, María J.; Singh, Dalvinder

doi:10.2139/ssrn.3244334

Cited by 5 publications

(3 citation statements)

References 8 publications

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“…Restoy (2019) adds France, Germany and Spain to the analysis. See also Binder et al (2019); these authors mainly study the systems in place in the US, UK, Spain and Germany. 29 For these considerations, see Restoy (2019).…”

Section: Rigidity Of Proceduresmentioning

confidence: 99%

The EU Bank Insolvency Framework: Could Less Be More?

et al. 2021

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The framework for bank crisis management in the Banking Union (BU) complies with multiple criteria. Each of these criteria is based on a sound policy rationale; however, when combined, they can generate unintended consequences that undermine the effectiveness of the system, highlighting a case of fallacy of composition. This paper suggests that a piecemeal reform is not adequate to tackle the framework's shortcomings. A broader effort is required to streamline the current criteria into a single rulebook, achieving effectiveness through simplification. The successful experience of the US framework for bank failure management provides a useful benchmark. It shows that the generalized, if not exclusive, reliance on a single, clearly defined, easily measurable and quickly actionable criterion -the Least Cost Test -makes it possible to offer full protection to taxpayers and to contain the destruction of value caused by bank failures, thereby safeguarding the economy. We suggest that its adoption by the BU would help to frame a common approach to failing banks of all sizes and would provide a unifying force and a solution to the geographic and institutional fragmentation of the current set-up.

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Section: Rigidity Of Proceduresmentioning

confidence: 99%

The EU Bank Insolvency Framework: Could Less Be More?

et al. 2021

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“…This is so, first, because board members in private DGSs typically have not only banking but also market expertise, potentially giving them the ability to identify certain trends faster than a bureaucrat might. To illustrate, Jens-Hinrich Binder and his co-authors find that industry participation helps early detection of financial stress, helping explain the German private DGS' high recovery rates in liquidation cases [97].…”

Section: Greater Exposure To Market Informationmentioning

confidence: 99%

The case for private administration of deposit guarantee schemes

Salama

Braga

2021

J Bank Regul

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We make the case that the responsibility for appointing board members in Deposit Guarantee Schemes (DGS) for commercial banks should be entrusted to the industry. In doing so, we challenge the position adopted by the International Monetary Fund, which has proposed public DGSs as the best practice. We lay out the comparative advantages of private over public DGS administration, and contend that the role of the government should in principle be limited to regulating DGSs specifically and financial markets in general. We conclude that the current worldwide trend towards greater involvement of government in financial regulation should not be extended to the administration of DGSs.

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“…Unless the failing bank passes this test, it will be liquidated under the terms of the national insolvency procedures of the Member State in which the bank is headquartered. See Binder et al (2019) for further details. 25 For an economic analysis of this trade-off see Bénassy-Quéré et al (2018).…”

Section: What Stands In the Way Of Edis?mentioning

confidence: 99%

Completing banking union

Mini¹

2020

EDIS, NPLs, Sovereign Debt and Safe Assets

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To complete banking union, there should be a single European deposit insurance scheme (EDIS) alongside the single supervisor and the single resolution authority. This would ensure uniformity across the Eurozone and facilitate the removal of barriers to the mobility of liquidity and capital within the single market. That in turn would promote efficiency in the banking sector and in the economy at large-just at the time that the EU needs to boost growth in order to remain competitive with the US and China. The EDIS promise to promptly reimburse insured deposits at a failed bank in the Eurozone should be unconditional. But who will stand behind that commitment? Who is the "E" in EDIS? Is its promise credible, even in a crisis? If a deposit guarantee scheme fails to deliver what people expect, panic would very likely erupt. Instead of strengthening financial stability, deposit insurance could destroy it. Yet this is the risk that current proposals pose. They create the impression that there will be a single deposit guarantee scheme. There will not. Instead, there will be a complex set of liquidity and reinsurance arrangements among Member State schemes. These defects need to be remedied. To do so, we propose creating a European Deposit Insurance Corporation (EDIC) alongside national schemes. For banks that meet EDIC's strict entry criteria and decide to become members, EDIC will promise to reimburse promptly-in the event the member bank fails-100 cents on the euro in euro for each euro of insured deposits, regardless of the Eurozone Member State in which the bank is headquartered. In effect, the single deposit guarantee scheme would be created via migration to EDIC rather than mutualisation of existing schemes. This would increase the mobility of capital and liquidity and lead to * SAFE policy papers represent the authors' personal opinions and do not necessarily reflect the views of the Research Center SAFE or its staff. The paper will be published as a chapter in "EDIS, NPLs, Sovereign Debt and Safe Assets", Andreas Dombret and Patrick S. Kenadjian, editors, Institute for Law and Finance Series, De Gruyter 2019.

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The Choice between Judicial and Administrative Sanctioned Procedures to Manage Liquidation of Banks: A Transatlantic Perspective

Abstract: Please refer to published version for the most recent bibliographic citation information. If a published version is known of, the repository item page linked to above, will contain details on accessing it.

Cited by 5 publications

References 8 publications

The EU Bank Insolvency Framework: Could Less Be More?

The EU Bank Insolvency Framework: Could Less Be More?

The case for private administration of deposit guarantee schemes

Completing banking union

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