The Bank Resolution and Recovery Directive
- Balancing financial stability and the rights of creditors of financial institutions
PhD Candidate Sjur Ellingsæter will present his project.
Open for all interested including students.
The Bank Resolution and Recovery Directive (BRRD) requires Member States to implement a sector-specific insolvency procedure termed resolution. Resolution is intended applied to failing financial institutions when the application of normal insolvency procedures conflicts with public interests such as preserving financial stability, maintaining the provision of critical financial services and protecting retail depositors.
The objective of normal insolvency law has traditionally been viewed as maximising the value available for distribution among creditors. Moreover, losses are (at least as a starting point) distributed equally among creditors, either through distributing available assets in accordance with a criteria of pro rata distribution (in the case of liquidation procedures) or through a pro rata reduction of claims against the debtor (in the case of reorganisation procedures).
Under the resolution procedure, value maximisation is subsidiary to protecting the abovementioned public interests. Moreover, these interests may mandate that the far-reaching powers of resolution authorities are exercised in a manner which results in the distribution of losses among creditors deviating from the distribution under normal insolvency law.
This PhD-project seeks to analyse how the BRRD addresses the tensions inherent in any legislative responses to the issues caused by the insolvency of large financial institutions. One tension is that between the interests of creditors and public interest objectives. Another example is the tension between the public interest in mitigating impending threats to financial stability (e.g. through protecting certain creditors from losses) and the interest in promoting financial stability in the long run (e.g. through eliminating expectations that certain creditors will be protected from losses).
We will serve coffee, tea and fresh fruit. Bring your lunch packet!