The role of the private sector in resolution for banks

Abstract

The recent financial crisis in the Euro area has shown the close and negative relationship between the balance sheets of some Member States and their banks. The EU, in order to interpose in such a relationship, has taken several measures. One of the most important is the institution of a resolution regime for banks which provides a specific role for the private sector. This paper is aimed at analysing the EU legal framework on the matter. Firstly, it grasps the original setting of the question with the purpose of understanding why sovereign risk and bank risk are strictly linked. Successively, it examines the EU rules defining resolution for banks. Within this ambit, it focuses on the bail-in and the limits on its application as well as on the Single Resolution Fund. Furthermore, it evaluates the role at issue in the light of the right to property. Finally, it analyses the assessment of the Court of Justice on whether, and to what extent, the involvement of the private sector in resolution for banks is lawful.