Author(s):
Enrico Perotti, Edoardo D. Martino
Date:
February 2024
Abstract:
The rapid escalation in uninsured deposit runs in March 2023 prompted calls for stronger ex-ante prudential measures, such as higher capital and liquidity norms, as well as an EU proposal aimed at increasing the use of the resolution process. This Policy Insight proposes a framework prioritising bank recovery over resolution. It aims to help solvent but undercapitalised banks recover early, enhance supervisory powers’ credibility, and ensure effective implementation of private bail-in requirements. Activation of these measures, based on specific indicators, would facilitate the recovery of viable yet undercapitalised banks.
Link:
CEPR Policy Insight 127 – Containing runs on solvent banks: Prioritising recovery over resolution