Part III Single Resolution and the BRRD, 12 Bank Resolution in Practice: Analysis of Early European Cases

Subject(s):

Bank resolution and insolvency — Securities — Regulated activities

This chapter explains that resolution lies at the heart of both the Bank Resolution and Recovery Directive and the Single Resolution Mechanism Regulation and that the preservation of taxpayers’ money through bail-in is one of its main political and ideological objectives. However, there are shortcomings in bail-in mainly due to small savers’ involvement and contagion effects. Moreover, the new regime does not cover ‘normal’ insolvency proceedings that remain regulated under national law, raising the issue of the relationship between EU resolution and national insolvency proceedings. The chapter deals with the cases of the Venetian Banks in Italy and Banco Popular in Spain. It concludes that, notwithstanding prompt regulatory responses to the 2008 crisis, the road to effective and credible bank resolution is slow and bumpy. The EU resolution framework is at risk of being displaced by path-dependent national rules, while the bail-in doctrine has met with opposition in practice, remaining de facto largely unapplied in major crisis episodes. Clearly, politicians and the public in general are still unprepared for a radical change in approach to crisis management.