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Finalisation of Basel III post-crisis reforms

12-12-2017

This note is mainly based on documents published by the Basel Committee on Banking Supervision (BCBS) on 7 December 2017 under the header Finalising Basel III post-crisis reforms, namely the High-level summary of Basel III reforms and the full text of the reforms. EGOV has previously published a briefing specifically on the role of the BCBS.

This note is mainly based on documents published by the Basel Committee on Banking Supervision (BCBS) on 7 December 2017 under the header Finalising Basel III post-crisis reforms, namely the High-level summary of Basel III reforms and the full text of the reforms. EGOV has previously published a briefing specifically on the role of the BCBS.

Feasibility check: transition to a new regime for banks’ sovereign exposure

30-11-2017

This note presents the summaries of two papers requested in June 2017 by the ECON Committee to external authors on “Feasibility check: transition to a new regime for banks’ sovereign exposure”. It also presents some relevant EU institutions’ position on the subject.

This note presents the summaries of two papers requested in June 2017 by the ECON Committee to external authors on “Feasibility check: transition to a new regime for banks’ sovereign exposure”. It also presents some relevant EU institutions’ position on the subject.

Arrangements for mitigating the impact of IFRS 9

24-11-2017

The legislative proposal regarding transitional arrangements for mitigating the impact of international financial reporting standard (IFRS) 9 on financial institutions' regulatory capital is scheduled to be voted in the November II plenary session. These arrangements should enter into force before the start of the mandatory application of IFRS 9, on 1 January 2018. Therefore, the European Parliament and the Council had agreed to adopt them using a rapid procedure.

The legislative proposal regarding transitional arrangements for mitigating the impact of international financial reporting standard (IFRS) 9 on financial institutions' regulatory capital is scheduled to be voted in the November II plenary session. These arrangements should enter into force before the start of the mandatory application of IFRS 9, on 1 January 2018. Therefore, the European Parliament and the Council had agreed to adopt them using a rapid procedure.

Ranking of bank creditors in insolvency

24-11-2017

One of the proposals from the 2016 banking reform package, dealing with the ranking of unsecured debt instruments in insolvency hierarchy, is due to be voted during the November II plenary.

One of the proposals from the 2016 banking reform package, dealing with the ranking of unsecured debt instruments in insolvency hierarchy, is due to be voted during the November II plenary.

Precautionary recapitalisations: time for a review

29-08-2017

This note provides a summary of 4 expert papers assessing the role of precautionary recapitalisation in the Banking Union.

This note provides a summary of 4 expert papers assessing the role of precautionary recapitalisation in the Banking Union.

Carving Out Legacy Assets: A Successful Tool for Bank Restructuring?

15-03-2017

This briefing drafted under supervision of the Economic Governance Support Unit reviews the options for a separation of non-performing and other problematic assets from the main business of a bank. This separation is essential for bank rehabilitation, though secondary loan markets are illiquid, and plagued by problems in valuation and information sharing. Independent asset management companies are therefore needed, in particular as a tool in resolution. The legal framework for such institutions should ...

This briefing drafted under supervision of the Economic Governance Support Unit reviews the options for a separation of non-performing and other problematic assets from the main business of a bank. This separation is essential for bank rehabilitation, though secondary loan markets are illiquid, and plagued by problems in valuation and information sharing. Independent asset management companies are therefore needed, in particular as a tool in resolution. The legal framework for such institutions should now be prepared.

Ulkopuolinen laatija

Alexander Lehmann

Carving Out Legacy Assets: A Successful Tool for Bank Restructuring?

15-03-2017

This paper was drafted under supervision of the Economic Governance Support Unit. European banks have accumulated more than €1 trillion in non-performing loans (NPLs) on their balance sheets after the burst of the 2007-2009 great financial crisis. The NPLs pose a potential threat to bank stability in euro-area countries such as Cyprus, Greece, Italy, Portugal and Slovenia, where more than 15% of the loans are non-performing. This paper assesses the effectiveness of the various resolution tools to ...

This paper was drafted under supervision of the Economic Governance Support Unit. European banks have accumulated more than €1 trillion in non-performing loans (NPLs) on their balance sheets after the burst of the 2007-2009 great financial crisis. The NPLs pose a potential threat to bank stability in euro-area countries such as Cyprus, Greece, Italy, Portugal and Slovenia, where more than 15% of the loans are non-performing. This paper assesses the effectiveness of the various resolution tools to deal with legacy assets such as NPLs under the resolution framework. On the one hand, the on-balance sheet tools (no tools, sales of entire bank, and asset guarantees) and on the other hand, the tools that carve out the assets from the banks’ balances (selling part of the bank, bridge bank and asset separation) are assessed based on the experiences in the aftermath of the financial crisis. The figures for the 79 euro-area banks that received capital support between 2007 and 2016 show that the differences in bank viability as well as financial and economic stability are fairly similar across tools, except for the sale of the entire business and bridge banks. Taking also the costs (losses and recapitalisation) into account, asset management companies in particular, as well as bridge banks, guarantees and no specific resolution tools, seem under the current conditions to effectively deal with legacy assets such as NPLs.

Ulkopuolinen laatija

Willem Pieter de Groen

Carving Out Legacy Assets: A Successful Tool for Bank Restructuring?

15-03-2017

This paper was drafted under supervision of the Economic Governance Support Unit. Beginning with the proposal by Enria (2017), the paper discusses the scope for successful bank restructuring through a carveout of impaired assets and a transfer of these assets to a government-sponsored asset management company. The paper argues that the success of such an operation requires a use of public funds, either outright or through contingent commitments. Clawback provisions are problematic because they create ...

This paper was drafted under supervision of the Economic Governance Support Unit. Beginning with the proposal by Enria (2017), the paper discusses the scope for successful bank restructuring through a carveout of impaired assets and a transfer of these assets to a government-sponsored asset management company. The paper argues that the success of such an operation requires a use of public funds, either outright or through contingent commitments. Clawback provisions are problematic because they create contingent liabilities that merely shift risks from the assets side to the liabilities sides of banks’ balance sheets. The paper distinguishes between asset impairments coming from considerations of prospective returns and asset impairments coming from frictions in the markets in which these assets are traded. It also distinguishes between threats to bank solvency and threats to bank funding/liquidity. In each case, the success of bank restructuring from asset carveouts depends on the extent to which threats to the bank’s solvency is eliminated. If these threats concern bank funding and asset liquidations at depressed prices, public funds may eventually not be needed. If threats to bank solvency come from nonperforming loans, taxpayer support may be essential. The notion of “real economic value” as the price at which assets should be transferred is problematic and leaves ample room for hidden subsidies. The success of restructuring of the individual bank may itself come at a risk to financial stability as the preservation of existing capacities maintains competitive pressure and depresses bank profitability. Additional risks may come from the burden on the government’s fiscal stance.

Ulkopuolinen laatija

Martin Hellwig

Carving Out Legacy Assets: A Successful Tool for Bank Restructuring?

15-03-2017

This paper drafted under supervision of the Economic Governance Support Unit considers a number of issues related to the restructuring of troubled banks in the EU. First, we provide an overview of how legacy assets have been dealt in a number of countries (drawing in particular upon the experience in Japan, the USA, Sweden and Spain), which support the case for a centralized solution in the presence of a generalized banking crisis. Second, we shed light on the need to differentiate between systemic ...

This paper drafted under supervision of the Economic Governance Support Unit considers a number of issues related to the restructuring of troubled banks in the EU. First, we provide an overview of how legacy assets have been dealt in a number of countries (drawing in particular upon the experience in Japan, the USA, Sweden and Spain), which support the case for a centralized solution in the presence of a generalized banking crisis. Second, we shed light on the need to differentiate between systemic and non-systemic events by examining the relevant literature on the credit channel. Third, we elaborate the theoretical argument on the need for a systematic centralised approach at the EU level to deal with legacy assets in bank restructuring to maintain fair recovery rates. Finally, we provide a preliminary assessment of the business models, risk, response to regulation and performance of 38 state aided banks via recapitalisation measures and explicit restructuring requirements with an emphasis on APS-AMC arrangements using available data between 2005 and 2015. The indicators show that these state aided banks are returning progressively to soundness and struggling to regain performance levels of the pre-crisis period, which is a generalised problem of the European banking sector.

Ulkopuolinen laatija

Rym Ayadi, Giovanni Ferri and Rosa M. Lastra

National Options and Discretions (NODs) in EU Banking Regulation - Overview, SSM Action and Possible Next Steps

19-01-2017

This briefing gives an overview of existing National options and discretions (NODs) in EU banking regulation, takes stock of the action undertaken by the Single Supervisory Mechanism so far to harmonize them - notably the publication on 24 March 2016 of an ECB Regulation and an ECB guide on options and discretions - and points to possible next steps. This briefing is regularly updated.

This briefing gives an overview of existing National options and discretions (NODs) in EU banking regulation, takes stock of the action undertaken by the Single Supervisory Mechanism so far to harmonize them - notably the publication on 24 March 2016 of an ECB Regulation and an ECB guide on options and discretions - and points to possible next steps. This briefing is regularly updated.

Tulevat tapahtumat

30-11-2020
EPRS online Book Talk | How to own the room (and the zoom) [...]
Muu tapahtuma -
EPRS
30-11-2020
Hearing on Future-proofing the Tourism Sector: Challenges and Opportunities Ahead
Kuulemistilaisuus -
TRAN
30-11-2020
LIBE - FEMM Joint Hearing: Combating Gender based Violence: Cyber Violence
Kuulemistilaisuus -
FEMM LIBE

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