Faculty of Economics and Business Administration Publications Database

Comment on the EP Draft Report on the Proposal for a Recovery and Resolution Directive

Number: 14
Pages: 1 - 2
Month: November
Link External Source: Online Version
Year: 2012
Keywords: Bail-in Bonds; Bank Resolution; Liikanen Report

This present comment suggests an amendment to the proposal for a directive of the European Parliament and of the Council, establishing a framework for the recovery and resolution of credit institutions and investment firms. The current proposal focuses on bail-in, but does not sufficiently take into account the pressure exerted on central bankers, supervisors and politicians by the fear of interbank contagion. The only way out of this hold-up type of situation can be found in bail-in bonds. Bail-in bonds are dedicated loss taking debt instruments, whose status of being first in line if it comes to default is clearly communicated from day one.