June 6, 2016 – VOX, the policy portal for the Center of European Policy Research (CEPR), published an article co-authored by SEP President Stefano Micossi, which discusses the origins of European bail-in regulation and highlights tools and legal provisions available to EU policymakers to discourage excessive risk-taking by bankers. Public outrage following the financial crisis of 2008-09, during which many Eurozone governments used taxpayer money to bailout banks, led to legislation requiring bank shareholders and creditors to incur losses prior to the application of any public backstop. This new EU regulatory system, enacted between 2013-2015, created burden-sharing and bail-in instruments to shift bank losses to its stakeholders. The article argues that this new discipline of state aid and bank restructuring provides a solid framework for combating moral hazard, and that these new rules should be applied without losing sight of aggregate policy needs of the banking system.
- The original article is available from VOX.