Why Closing Failed Banks Helps the Real Economy

• Authors: Korte Josef
• Languages of publication: EN

Abstracts

EN

It is widely agreed that banks play a growth-enhancing role for the real economy. However, distorted incentives around bank insolvency may corrupt banks' credit allocation and monitoring - ultimately leading to suboptimal real economic performance. The outcomes of such distorted incentives are suboptimal credit allocation and monitoring - which is felt in the real economy: Not the projects and firms that need (and deserve) credit most on grounds of economic viability and profitability, but those that have particular risk- or asset-profiles are now favored by incentive-corrupted financial intermediaries. The results strongly advocate putting bank insolvency and resolution regimes center stage in discussions towards reforming bank regulation. In the European context, this calls for particular emphasis on the common resolution framework and the Single Resolution Mechanism as a vital part of the European Banking Union.

Keywords

EN

Banks, Insolvency, Bank bankruptcy, Conference materials

PL

Banki, Niewypłacalność, Upadłość banku, Materiały konferencyjne

• Publisher: Bankowy Fundusz Gwarancyjny
• Journal: Bezpieczny Bank
• Year: 2014
• Issue: 2(55)
• Pages: 85-90

Contributors

author

Korte Josef

• Goethe University Frankfurt, Germany, Ph.D. student

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