Understanding Bank Recovery And Resolution In The Eu: A Guidebook To The Brrd

  • Date Published 14/12/2024
Understanding Bank Recovery And Resolution In The Eu:  A Guidebook To The Brrd
Understanding Bank Recovery And Resolution In The Eu: A Guidebook To The Brrd

When a company turns insolvent, it should exit the market in an orderly manner, and should not be allowed to destroy economic wealth on a continuing basis. This is a precondition of a functioning market economy, and should also apply to failing financial institutions. The financial crisis, however, demonstrated that, when it comes to creative destruction, banks are different. Failing financial institutions were kept on life support, and the hospital bills were sent to the taxpayer. This was done because Europe wanted to avoid the unpalatable alternative of witnessing a re-run of Lehman Brothers. Lehman showed that the insolvency of a large or interconnected financial institution can result in a full-blown meltdown of the entire industry. A lack of appropriate tools for the resolution of banks resulted in the necessity to resort to public funds to maintain financial stability.

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Understanding Bank Recovery And Resolution In The Eu: A Guidebook To The Brrd

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