Journal of Applied Finance & Banking

Banking crisis management in the European Resolution Framework: from “bail-out” to “bail-in”

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• Abstract

  The European Directive 2014/59 c.d. the BRRD - Bank Recovery and Resolution Directive, introduces harmonized rules for handling bank resolution and banking crises. This legislation gives the crisis management and crisis management authorities - the ECB and the national supervisory authorities - powers and tools to: i. Planning crisis management; ii. Intervening in time before the crisis; iii. Handle the resolution phase. The bail-in, translated with “internal rescue”, is a tool that should enable the supervisors to reduce the value of the shares and receivables due to the bank or to convert them into shares to absorb losses and recapitalize the bank sufficiently in order to restore adequate capitalization and maintain market confidence. This paper discusses the evidence of the rescue of four non-large Italian banks carried out at the end of 2015. It also points out that it would be necessary to use the new rules on resolutions that were considered too dangerous for creditors of the banks in question in 2016.

  JEL classification numbers: G21, G01, G33
  Keywords: BRRD, Bank Resolution, Financial Crises, Italian banks