ABSTRACT

This chapter examines the implications of the resolution framework for euro area banks and their creditors during the global financial crisis. It focuses on the Single Resolution Mechanism (SRM), the means by which the bank resolution and recovery directive (BRRD) will be implemented in euro area countries. The chapter investigates a retrospective application of the bail-in tool provided for in the BRRD and SRM. It talks about the data used in the analysis and the empirical results relating to impairments, bail-ins and triggers. Fundamental accounting data relating to European banks is sourced from Bankscope for the period 2006 to 2012. The chapter outlines the forthcoming European framework for bank resolution. The bail-in analysis considers the proportion of balance sheet liabilities required for bail-in according to bank size.The BRRD provides guidelines to deal with distressed banks at a national level across all 28 European Union countries, in addition to provisions to resolve cross-country bank failures.