Online seminar: Banking on Bail-in
The last online seminar of the Florence School of Banking and Finance took place 10 years after the failure of Lehman Brothers. This recurrence provided the opportunity to reflect on how bank regulation evolved in the past decade, essaying ultimately to find a comprehensive answer to the following question: have we built effective solutions to the issues of bank failures and systemic risk?
The discussion in the seminar explored what is place today, both on a conceptual policy level, and whether the implemented solutions pass a credibility test for effectiveness now. Additionally, it also explored issues that remain still open – the ‘to do’ list – assessing what are the key policy risks, and how they can be addressed. Finally, the session looked at cross-border issues – both international and intra EU – touching upon topics such as the relationship between bail-in and the Banking Union.
The seminar was opened by a presentation by Wilson Ervin, Vice Chairman at the Group Executive Office of Credit Suisse Group, who discussed the conceptual ideas and practical approaches to solve the problem of ‘too big to fail’, discussing in particular bail-ins and their implementation in Europe and in the US. In the final part of his presentation, the participants were exposed to the pending actions for Europe, including issues related to MREL (which, as Wilson Ervin pointed out, ‘is not fully in place’), predictability and stability, liquidity provisions and ring-fencing pressures, both global and intra-EU.
The main presentation was followed by two comments, by the former Governor of the Central Bank of Ireland Patrick Honohan, currently Honorary Professor of Economics at Trinity College Dublin and Nonresident Senior Fellow at the Peterson Institute for International Economics, and Stefano Cappiello, Deputy Director of the Florence School of Banking and Finance.
Asked to provide their feedback on what is the biggest challenge for European resolution, a numerous group of participants pointed to ‘political will'(38%), but the other options were not neglected: 18% of the participants think that MREL needs to be built out, 15% pointed to predictability, 14% to ECB/NCB liquidity, and 12% to ring fencing/Banking Union.