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    A Coasean Approach to Bank Resolution Policy in the Eurozone


    Connor, Gregory and O'Kelly , Brian (2013) A Coasean Approach to Bank Resolution Policy in the Eurozone. NUIM Maynooth. (Unpublished)

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    Abstract

    The Eurozone needs a bank resolution regime that can work across seventeen independent nations of diverse sizes with varying levels of financial development, limited fiscal coresponsibility, and with systemic instability induced by quick and low-cost deposit transfers across borders. We advocate a Coasean approach to bank resolution policy in the Eurozone, which emphasises clear and consistent contracts and makes explicit the public ownership of the externality costs of bank distress. A variety of resolution mechanisms are compared including bank debt holder bail-in, prompt corrective action, and contingent convertible bonds. We argue that the “dilute-in” of bank debt holders via contingent convertibility provides a clearer and simpler Coasean bargain for the Eurozone than the more conventional alternatives of debt holder bail-in or prompt corrective action.

    Item Type: Other
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 4387
    Depositing User: Ms Sandra Doherty
    Date Deposited: 10 Jun 2013 13:01
    Publisher: NUIM Maynooth
    URI:

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