How to involve other banks in bank rescue operations?

In four recent international bank resolution cases other banks stepped in and took over (part of) the failing banks. This position paper argues that public authorities’ aim to quickly find a buyer may have made them accept prices that were “too low”, thereby imposing losses on the state and on deposit guarantee schemes. Keeping failed banks longer in receivership, writing off their truly bad parts, and thereafter selling them in an auction may be welfare enhancing and more cost-effective in the end. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee.