Abstract
This article analyzes whether the funds set by the recent EU directives on bank resolution and deposit insurance to create a safer and sounder financial sector (that is, 1 and 0.8 per cent of covered deposits, respectively) are adequate to cover unexpected losses for the Spanish banking system. By applying a framework based on the foundation internal ratings-based approach established in Basel Capital Accords, we find that the fixed target levels proposed by the EU bank rules would not ensure the highest credit quality for a bank resolution and deposit insurance Fund in Spain. Nevertheless, these resources would be sufficient to ensure a good solvency level for the Fund, equivalent to an AA S&P rating in 2013.
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