The recent financial crisis of 2007-2009 (the crisis) has been dramatised as the worst crisis since the great de- pression in the 1930s. Prompt regulatory response was required in order to contain the spread of fear and stop the mistrust with the ultimate goal to restore the confidence into the financial institutions and markets as well as prevent the collapse of the real economy. Financial crises containment can be defined as the enhancement of “… soundness and stability of the banking …” which is essential to “…ensure legal certainty and to restore confidence in financial markets” Regulators have a whole set of tools to respond to crises, using an existing regime and or implementing a special resolution regime. Latter has a broad span reaching from capital injections to expropriation. Undoubtedly, the measures raise legal questions regarding their raison d’être and liability of those exercising the measures. Moreover, the measures have individual merits and demerits varying in respect of their costs and perspective of the market participants.
The purpose of this essay is to analyse these responses. Therefore, different measures will be identified and evaluated in light of the Economic and Financial Affairs Council’s common principles for action 5 and the Commission Communication of State Aid 6 which have been determined as representative guidelines for policy makers in drafting a response regime. It will be concluded that there is no clear cut answer to which are the most successful measures; nevertheless, there is empirical evidence of which are the most favoured responses by regulators. The measures will be in response to an acute crisis, ie the prevention and resolution of a crisis will not be treated in this essay. In addition, the responses will be limited to the European Union.
The next chapter is dived in 5 parts exploring mechanisms to contain financial crises. It represents a sequence that has been observed in the recent crisis in Europe. Chapter 3 gives an outlook. The last chapter concludes.
Inhaltsverzeichnis (Table of Contents)
- I. Introduction
- II. The evolution and stages of the responses
- Regime already in place - the ex ante measures:
- Deposit Guarantee Schemes
- Lender of last Resort (emergency loans)
- Special Resolution Regime
- Measures for the containment
- The Liability Side Measures - ex post measure part one
- The Asset Side Measures - ex post measure part two
- Resolving of trouble institutions - ex post measure part three
- III. outlook
- IV. Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
The main objective of this essay is to analyze the different regulatory responses to the financial crisis of 2007-2009 in the European Union. It aims to evaluate these measures in light of the Economic and Financial Affairs Council's common principles for action and the Commission Communication of State Aid.
- The impact and containment of the 2007-2009 financial crisis
- Regulatory responses and their effectiveness
- The role of deposit guarantee schemes and the lender of last resort
- The implementation of special resolution regimes
- The legal and economic considerations of various containment measures
Zusammenfassung der Kapitel (Chapter Summaries)
The essay begins with an introduction that provides context for the financial crisis and the need for regulatory responses. It then delves into the evolution and stages of these responses, focusing on both ex ante and ex post measures. The chapter explores different mechanisms like deposit guarantee schemes, the lender of last resort, and special resolution regimes, providing detailed explanations of their functionalities and effectiveness.
The next section examines the liability and asset side measures implemented to contain the crisis, highlighting the rationale and consequences of capital injections, asset purchasing, and asset guaranteeing. The chapter concludes by discussing the resolution of troubled institutions through temporary nationalisation, restructuring, and the creation of bad and good banks.
The essay concludes with an outlook, providing further insights and potential future implications. It does not delve into the final chapter or any conclusive statements to avoid spoilers.
Schlüsselwörter (Keywords)
The main keywords and focus topics of this essay include financial crisis, regulatory responses, containment measures, deposit guarantee schemes, lender of last resort, special resolution regimes, capital injections, asset purchasing, asset guaranteeing, temporary nationalisation, restructuring, bad banks, good banks, European Union, state aid, legal certainty, confidence in financial markets, and economic stability.
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- Christian Alexander Mecklenburg-Guzman (Autor), 2011, Financial Crisis Management, Múnich, GRIN Verlag, https://www.grin.com/document/177257
