According to the Bank Recovery and Resolution Directive (BRRD), introduced as a lesson from the recent financial crisis, the losses a failing bank incurred should generally be borne by its investors. Before a minimum bail-in has occurred, government money can only be injected in emergency cas-es...

The European Commission has published a Green Paper outlining possible measures to create a single market for capital in Europe. Our comments on the Commission's capital markets union project use the functional finance approach as a starting point. Policy decisions, according to the functional...

The publication of the Liikanen Group's final report in October 2012 was surrounded by high expectations regarding the implementation of the reform plans through the proposed measures that reacted to the financial and sovereign debt crises. The recommendations mainly focused on introducing a...

This briefing paper describes and evaluates the law and economics of institution(al) protection schemes. Throughout our analysis, we use Europe's largest such scheme, that of German savings banks, as paradigm. We find strengths and weaknesses: Strong network-internal monitoring and early warning...

To ensure the credibility of market discipline induced by bail-in, neither retail investors nor peer banks should appear prominently among the investor base of banks' loss absorbing capital. Empirical evidence on bank-level data provided by the German Federal Financial Supervisory Authority...

The great financial crisis and the euro area crisis led to a substantial reform of financial safety nets across Europe and - critically - to the introduction of supranational elements. Specifically, a supranational supervisor was established for the euro area, with discrete arrangements for...

The SVB case is a wake-up call for Europe's regulators as it demonstrates the destructive power of a bank-run: it undermines the role of loss absorbing capital, elbowing governments to bailout affected banks. Many types of bank management weaknesses, like excessive duration risk, may raise...

The European Union's banking union project started in mid-2012 in response to the euro-area crisis, with the goal of breaking the bank-sovereign vicious circle. The objective was also to restore private liability in banking and to move towards an integrated supranational market for banking...

The European Commission has published a Green Paper outlining possible measures to create a single market for capital in Europe. Our comments on the Commission's capital markets union project use the functional finance approach as a starting point. Policy decisions, according to the functional...

The publication of the Liikanen Group's final report in October 2012 was surrounded by high expectations regarding the implementation of the reform plans through the proposed measures that reacted to the financial and sovereign debt crises. The recommendations mainly focused on introducing a...