2016年-CEPS欧洲政策研究中心_Fine_20页_2mb

Summary of "Fine-tuning the use of bail-in to promote a stronger EU financial system"

Core Content

This report by Stefano Micossi, Ginevra Bruzone, and Miriam Cassella examines the EU's use of bail-in and burden-sharing mechanisms in the context of financial stability and bank restructuring. It highlights the importance of these instruments in preventing moral hazard and ensuring that losses from bank failures are borne by shareholders and creditors, rather than by taxpayers.

Main Goals of the EU Bail-in Framework

The EU regulatory reforms since 2012 aim to:

• Eradicate moral hazard by removing the implicit public guarantee of banks.
• Enable individual banks to fail without causing systemic risk, thereby reducing reliance on public support.
• Ensure a level playing field within the internal market by aligning the costs of bank failures across member states.

Key Points from the Report

1. The Role of Bail-in and Burden-Sharing

• Bail-in involves the write-down or conversion of capital instruments (e.g., subordinated debt, equity) to absorb losses.
• Burden-sharing is a key mechanism under the 2013 Banking Communication and the BRRD (Bank Recovery and Resolution Directive).
• The European Commission uses Article 107(3)(b) TFEU to assess the compatibility of state aid with the EU Treaty, ensuring that public support is only used when necessary.

2. The Banking Communication (2013)

• Introduced burden-sharing for both shareholders and subordinated creditors.
• Emphasized the no creditor worse off principle, ensuring that bailed-in creditors are not worse off than they would have been in a normal insolvency scenario.
• Required that capital raising and loss absorption be considered before any public support is provided.

3. The BRRD (Bank Recovery and Resolution Directive)

• Provides legal framework for bail-in, including the write-down and conversion of capital instruments.
• Allows for precautionary recapitalisations of solvent banks under specific conditions (e.g., stress tests, asset quality reviews).
• Excludes insured deposits from bail-in, but includes deposit insurance funds as a potential alternative.

4. Conditions for Bail-in

• Bail-in is triggered in cases of resolution, viability loss, or extraordinary public support.
• Precautionary recapitalisations are allowed under Article 32(4)(d)(iii) of the BRRD, provided they are temporary, proportionate, and not used to offset future losses.
• The 8% loss absorption requirement is a key threshold for using bail-in.

5. Systemic Risks and Market Reactions

• The risk of capital write-offs may lead to investor flight and systemic instability, especially in times of confidence or liquidity crises.
• The current low profitability and economic stagnation in the EU may hinder market-based recapitalisation, necessitating public support.
• The ECB's low interest rates further reduce bank profitability, increasing the likelihood of capital shortfalls.

6. Limitations of the Current Framework

• The case-by-case approach may not account for aggregate financial stability needs.
• Emergency liquidity assistance (ELA) is not sufficient to address long-term recapitalisation needs.
• The complexity of the legal framework and uncertainty in its application may lead to market instability.

7. Economic Policy Considerations

• The EU's banking system still faces systemic fragility due to the legacy of the financial crisis.
• Confidence and liquidity shocks can affect large segments of the banking system, making bail-in potentially counterproductive.
• The lack of a supranational deposit insurance system increases the risk of contagion and sovereign debt crises.

Key Recommendations

• The existing rules provide flexibility to address aggregate policy needs, but they must be applied with caution.
• A precautionary recapitalisation scheme should be developed to support solvent banks in times of systemic risk.
• The use of bail-in should be limited to cases where necessary to avoid triggering investor panic and market instability.

Conclusion

The report concludes that while the EU's bail-in and burden-sharing rules are well-intentioned, they must be fine-tuned to account for systemic risks and market failures. The legal flexibility exists to support aggregate financial stability, but its effective implementation requires careful coordination and policy foresight to prevent unintended consequences such as investor flight and financial contagion.