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- Title
Cross-Border Bank Resolutions and its Challenges.
- Authors
Morais, Luis Domingos Silva
- Abstract
The article "Cross-Border Bank Resolutions and its Challenges" by Luis Domingos Silva Morais discusses the challenges of cross-border bank resolutions. Various aspects are discussed, including the problems in resolution planning for globally systemically important banks (G-SIBs) such as Credit Suisse and other multinational banking groups. Specific issues in implementing resolution strategies for cooperative banks and questions regarding bail-in regulations for private actors from different legal jurisdictions are also addressed. The article emphasizes that the banking crisis of 2023 points to a general trend characterized by increased volatility and tensions in the banking sector. The speed of bank runs is accelerated by digital innovations, while exposure to stock markets and instruments such as CDS increases. The EU resolution system is seen as a crucial part of the solution to these financial stress situations, but it requires flexibility and reforms to effectively deal with the new challenges. The article also emphasizes the importance of cross-border bank resolution and highlights the positive aspects of the European Commission's CMDI proposal, which provides for better financing and liquidity in resolution, as well as an extended scope of resolution for medium-sized banks. The proposed changes to CMDI include, among other things, a specific assessment of whether liquidation assistance can be expected in the event of insolvency, which could lead to a positive public interest. Another aspect is the concept of regional systemic importance, which takes into account the need to prevent economic disruptions at the regional level. Despite some limited reforms, however, CMDI does not seem to offer optimistic short-term results, at least before the 2024 European elections. Cooperation between the Single Resolution Board (SRB) and national resolution authorities (NRAs) plays a crucial role within the Single Resolution Mechanism (SRM). However, there are differences between the SRM and the SSM system for banking supervision, as the SRM relies more on cooperation with NRAs. There are also important cross-border issues related to the preventive dimension of the European resolution regime, especially for large cross-border financial groups. However, there is no global harmonization of bank resolution regimes, although there are efforts at coordination by the FSB. In the US and the EU, there are different approaches to the consolidation of banks and holding companies. This has implications for crisis management perspectives regarding cross-border resolutions. The article addresses various aspects of bank resolution and cross-border resolution. It emphasizes that high communication and planning are necessary to ensure adequate and consistent coordination with authorities. It also mentions bilateral agreements between the EU and non-EU authorities that are intended to facilitate cooperation in resolution. Special attention is given to cooperative banks, which present particular challenges in resolution due to their specific structure and cross-border activities. It is emphasized that a differentiated and segmented banking landscape with different business models and players should be pursued. The development of supranational networks of cooperative banks within the EU is discussed as a possible solution, but it also presents various challenges. The article addresses
- Subjects
CREDIT Suisse Group AG; COOPERATIVE banking industry; EUROPEAN Commission; BANKING industry; BANK holding companies; BANK runs; DIGITAL technology; BANK mergers; CREDIT default swaps; CROSS border transactions
- Publication
Zeitschrift für Bankrecht und Bankwirtschaft, 2024, Vol 36, Issue 1, p70
- ISSN
0936-2800
- Publication type
Article
- DOI
10.15375/zbb-2024-0115