In the beginning of 2016, the European Commission imposed, in the Eurozone, the bail-in mechanism as a standard procedure to recover and resolve banks which have been weakened by the financial crisis. This new measure intends to replace the bailout practice that has been refered to be associated with the current Eurozone sovereign debt crisis. The purpose of this paper is to study this new banking legislation and, retrospectively, apply it to Banco Espírito Santo (BES), a Portuguese bank which was resolved on 4 August 2014 through an asset separation tool. This exercise endeavours to understand what the bail-in mechanism is, how it is performed and, in the particular case of BES to analyse how it would have been different from the resolution that effectively occurred. The results suggest that the application of the bail-in mechanism to BES would have granted, in the worst-case scenario, savings for the Portuguese State of about 60%. In addition, it was observed that it would have been sufficient that the investors of the entity had sustained losses of 28%, in order for the bank not to need any intervention.
Date of Award | 24 Oct 2016 |
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Original language | English |
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Awarding Institution | - Universidade Católica Portuguesa
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Supervisor | Carlos Manuel Ferreira dos Santos (Supervisor) |
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- Bail-in
- Bank regulation
- Eurozone
- Directive for bank recovery and resolution
- Banco Espírito Santo (BES)
- Mestrado em Economia Empresarial
The bail-in enforcement: the application of the resolution tool to Banco Espírito Santos
Oliveira, F. M. D. (Student). 24 Oct 2016
Student thesis: Master's Thesis