Ojo, Marianne (2010): Measures aimed at enhancing the loss absorbency of regulatory capital at the point of non viability. Published in: Bank for International Settlements (BIS) Publications (1 October 2010)
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The Basel Committee’s recent consultative document on the “Proposal to Ensure the Loss Absorbency of Regulatory Capital at the Point of Non Viability” sets out a proposal aimed at “enhancing the entry criteria of regulatory capital to ensure that all regulatory capital instruments issued by banks are capable of absorbing losses in the event that a bank is unable to support itself in the private market.”
As well as demonstrating its support of the Basel Committee’s statement that a public sector injection of capital should not protect investors from absorbing the loss that they would have incurred (had the public sector not chosen to rescue the bank), this paper also highlights identified measures which have been put forward as means of rescuing failing banks – without taxpayer financing. Furthermore, it highlights why the controlled winding down procedure also constitutes a means whereby losses could still be absorbed in the event that a bank is unable to support itself in the private market.
|Item Type:||MPRA Paper|
|Original Title:||Measures aimed at enhancing the loss absorbency of regulatory capital at the point of non viability|
|Keywords:||capital; insolvency; financial crises; moral hazard; Basel III; Investor Compensation Schemes Directive; bail outs; equity; liquidity|
|Subjects:||D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D53 - Financial Markets
K - Law and Economics > K2 - Regulation and Business Law
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
G - Financial Economics > G0 - General > G01 - Financial Crises
|Depositing User:||Dr Marianne Ojo|
|Date Deposited:||07 Sep 2010 18:36|
|Last Modified:||02 Mar 2013 08:08|
Association for Financial Markets in Europe, “AFME Outlines Ways To Rescue Failing Banks Without Tax Payer Financing” http://www.afme.eu/AFME/Home/sifi%20pr.pdf
Basel Committee on Banking Supervision, Consultative Document “Strengthening the Resilience of the Banking Sector” December 2009 <http://www.bis.org/publ/bcbs164.htm>
Basel Committee on Banking Supervision, Consultative Document “Proposal to Ensure the Loss Absorbency of Regulatory Capital at the Point of Non Viability” August 2010 at < www.bis.org/publ/bcbs174.htm.>
“Basel Committee Says Bank Bond Investors Should Help Fund Future Bailouts” <http://www.bloomberg.com/news/2010-08-19/basel-committee-says-bank-bond-investors-should-help-bear-cost-of-bailouts.html>
Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field (OJ L 141,11.6.1993, p. 27–46).
DG Internal Market and Services, EVALUATION OF THE INVESTMENT COMPENSATION SCHEME DIRECTIVE DG INTERNAL MARKET AND SERVICES EXECUTIVE REPORT AND RECOMMENDATIONS http://ec.europa.eu/dgs/internal_market/docs/evaluation/inv-comp-schem-directive_en.pdf
Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on Deposit-Guarantee Schemes
Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on Investor Compensation Schemes (OJ L 84, 26.3.1997, p. 22).
European Banking Federation, Comments on consultative documents issued by Basel Committee on Banking Supervision “Strengthening the Resilience of the Banking Sector” and “International Framework for Liquidity Risk Measurement, Standards and Monitoring” http://www.finansraadet.dk/media/208544/ebf_hoeringssvar_international_framework_for_liquidity_risk_measurement_standards_and_monitoring_150410.pdf
European Commission, “State Aid no NN 44/2008 – Germany Rescue aid for Hypo Real Estate” http://ec.europa.eu/competition/state_aid/register/ii/doc/NN-44-2008-WLWL-en-02.10.2008.pdf
European Commission “European Commission State aid no N 694/2009 – Germany Emergency Guarantees for Hypo Real Estate”
European Commission, “State Aid N194/2009 – United Kingdom : Liquidation Aid to Bradford and Bingley Plc”
Federazione Italiana delle Banche di Credito Cooperativo Casse Rurali ed Artigiane,(Federcasse) Comments on consultative documents issued by Basel Committee on Banking Supervision “Strengthening the Resilience of the Banking Sector” and “International Framework for Liquidity Risk Measurement, Standards and Monitoring” http://www.bis.org/publ/bcbs165/ifoccb.pdf
Laeven L and Majnoni G, „Loan Loss Provisioning and Economic Slowdowns: Too Much, Too Late?
Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 97/9/EC of the European Parliament and of the Council on investor compensation schemes at page 2 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0371:FIN:EN:PDF
Reuters; “Hypo Real Estate is Nationalised with Squeeze Out” <http://www.reuters.com/article/idUSLD67573320091013>
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