The Bank Resolution Framework in the European Union: Preliminary Evidence from Specialized and Regional Banks

Abstract

Post-crisis bank regulations have recognized the need for the creation of a formalized resolution framework which would enable the efficient resolution of troubled banks with no or limited use of public funds. However, resolution schemes are based on complex procedures which aim to balance out the interests of different stakeholders. The purpose of this chapter is to identify the key elements of a resolution framework under the single resolution mechanism (SRM) and the bank recovery and resolution directive (BRRD) and to assess its impact based on preliminary empirical evidence. In particular, the evidence on specialized (mortgage) and regional banks is analysed, with a special focus on Italy and the Netherlands. The study aims to demonstrate that the new European resolution framework addresses the issues identified during the crisis and contains sufficient instruments and arrangements to enable the efficient resolution of large banks, as illustrated by the SNS Reaal case. However, there are a number of serious economic and social issues when it is applied to smaller banks or bank networks, as illustrated by the Italian banks.