27.07.2012
Financial market

The European Commission plans to regulate handling of banks in crisis

How do you deal with a bank in case of a crisis? The European Commission wants to clarify this issue with a draft directive. This shall regulate how a bank in crisis can be restructured and phased out in case of an emergency. The GDV now presents its position on the proposed directive.

The aim of the proposal, which was published in June 2012, is the creation of a European legal framework for dealing with banks in case of a crisis. The GDV opposes the plan to make rules on creditor participation in prospective restructuring and resolution of credit institutions retroactively effective. Furthermore, the decision regarding the necessity of the restructuring or resolution of a bank should be made on the basis of objective and quantitatively verifiable criteria. That is the only way to guarantee maximum transparency.

The coverage of bonds should only serve as a security for the holders of bonds. It should be included in creditor participation. The GDV holds the view that there should be no exceptions for creditor participation regarding maturities of less than one month. This would create false incentives which could lead to short-term and crisis-amplifying refinancing of affected banks.

German insurance companies belong to the leading institutional investors in the capital market. They manage around 1.3 billion Euros.

The GDV’s complete position paper is available in the download section.

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on the European Commission’s proposal for a Directive establishing a framework for the recovery and resolution of credit

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