No. 71 - Towards a new framework for banking crisis management. The international debate and the Italian model

The recent financial crisis reopened a wide debate over the management and resolution of banking crises. Following the global turmoil, a new set of principles and rules has been explored, both at national and international level, in order to overcome the flaws that emerged in the legal systems and to address the crises of systemically important institutions, preventing new cases of bail out at taxpayers' expensies.

Drawing on the analyses made by economists and regulators, the paper looks at the most relevant banking crises in the US and in Europe, highlighting, case by case, the new tools employed by governments and central banks as well as their possible drawbacks.

The paper includes a comprehensive reconstruction of institutional frameworks as they were before and after the reforms that followed the financial crisis. In this context, a special focus is given to the initiatives currently on the international agenda, which aimes at setting up a common framework to be implemented by national authorities.

The work focuses on the efforts made at European level to introduce new resolution tools, both in going concern (bail-ins) and gone concern (transfer of assets and liabilities, bad banks, bridge banks), while a specific in-depth analysis has been made with reference to the reform proposals concerning the SIFIs (Systemically Important Financial Institutions), in light of the ongoing international debate to reduce moral hazard.

Specific emphasis has been given to the Italian crisis management and resolution model, which has not been adequately investigated so far in the international economic and juridical literature, even though the model has been in force since 1936 with an unquestionable success. The essay highlights, however, that some of the newly-issued resolution regimes have followed the basic lines of the model as a frame of reference.