The Future of Financial Regulation - Who Should Pay for the Failure of American and European Banks?

A number of changes have been made to the supervision and regulation of banks as a result of the recent financial meltdown. Some are for the better, such as the Basel III rules for increasing the quality and quantity of capital in banks, but legal changes on both sides of the Atlantic now make it much more difficult to resolve failing banks by means of taxpayer funded bail-outs and could hinder bank resolution in future financial crises. In this book, Johan A. Lybeck uses case studies from Europe and the United States to examine and grade a number of bank resolutions in the last financial crisis and establish which were successful, which failed, and why. Using in-depth analysis of recent legislation, he explains how a bank resolution can be successful, and emphasizes the need for taxpayer-funded bail-outs to create a viable banking system that will promote economic and financial stability. Analyses and grades several bank resolutions in the last financial crisis, establishing which were successful, which failed, and why, providing an invaluable resource for academic researchers, graduate students, practitioners and policy makers Presents and analyses the recent changes in legislation (Dodd Frank in the United States, the Bank Recovery and Resolution Directive and the Single Resolution Mechanism in Europe) and proposes improvements - this broad survey is one of the first to appear from an economic rather than a legal point of view Unique cross-Atlantic perspective helps to clarify the differences between individual bank resolutions as well as the difference between approaches to systemic banking crises in Europe and the US

Acknowledgements List of abbreviations Introduction Part I. A Chronological Presentation of Crisis Events January 2007–December 2014 Part II. Bail-Out and/or Bail-In of Banks in Europe – A Country-by-Country Event Study on Those European Countries Which Did Not Receive Outside Support: 1. United Kingdom: Northern Rock, Royal Bank of Scotland (RBS), Lloyds Banking Group 2. Germany: IKB, Hypo Real Estate, Commerzbank, Landesbanken 3. Belgium, France, Luxembourg: Dexia 4. Benelux: Fortis, ING, SNS Reaal 5. Italy: Monte dei Paschi de Siena 6. Denmark: Roskilde Bank, Fionia Bank and the others vs Amagerbanken and Fjordbank Mors Part III. Bail-Out and/or Bail-In of Banks in Europe – A Country-by-Country Event Study on Those European Countries Which Received IMF/EU Support: 7. Iceland: Landsbanki, Glitnir and Kaupthing 8. Ireland: Anglo Irish Bank, Bank of Ireland, Allied Irish Banks 9. Greece: Emporiki, Eurobank, Agricultural Bank 10. Portugal: Caixa Geral, Banco Espirito Santo, Millennium Bank 11. Spain: Bankia and the other ex-cajas 12. Cyprus: Bank of Cyprus, Popular Bank (Laiki) Part IV. The Tarp Program and the Bailing Out (and Bailing In) of US Banks: 13. The roles of the FDIC, the Treasury and the Fed in the crisis 14. USA: Bear Stearns, Merrill Lynch and Lehman Brothers 15. USA: Countrywide, IndyMac, Washington Mutual and Wachovia 16. USA: AIG, Citibank and Bank of America: zombies too big to fail? Part V. Summary of the Micro Studies Part VI. Political and Regulatory Responses to the Crisis – To Bail Out or To Bail In, That's the Question: 17. Future bail-outs in the United States under Dodd-Frank and OLA 18. Future bail-outs in the European Union under the Single Resolution Mechanism and the Bank Recovery and Resolution Directive Conclusion: towards host-country supervision and resolution? Addendum Bibliography Index. Full table of contents