This paper focuses on the recapitalisation of failing banks. A recapitalisation is efficient if the social benefits (preserving systemic stability) exceed the cost of recapitalisation. In a national setting, the implementation of an optimal policy is relatively straightforward. But in a...

Pan-European banks are starting to emerge, while arrangements for financial supervision and stability are still nationally rooted. This raises the issue who should bear the burden of any proposed recapitalisation should failures occur in a large cross-border bank. A recapitalisation is efficient...