Containing runs on solvent banks and the AT1 market

 

 

CEPR is delighted to invite you to a presentation and discussion based on the publications:
The need for reform after the demise of Credit Suisse
Beatrice Weder di Mauro (CEPR, Geneva Graduate Institute and Hoffmann Global Institute for Business and Society INSEAD)
and
Containing Runs on Solvent Banks: Prioritizing recovery over resolution
  Enrico Perotti (University of Amsterdam, European Central Bank and CEPR)

 

After a decade of reforms aimed at making sure that „no bank is too big to fail“, the collapse of Credit Suisse was the first real-life test of the framework.  A resolution following the Swiss Too-Big-To-Fail framework would have implied a recapitalization of Credit Suisse by bailing-in all loss absorbing capital (about 70 bn USD). The Swiss authorities chose orchestrated a state-supported acquisition of Credit Suisse by UBS and only bailed-in the AT1 instruments (about 16 bn USD to support the deal).  
This possibility or write-down of AT1 in case of a state intervention was clearly foreseen in the prospectus. Nevertheless,  it took many investors, market participants and even supervisors by surprise and upset the AT1 market for a few days.

In this webinar, Beatrice Weder di Mauro, a member of the Swiss Expert Group on Banking Stability, will discuss lessons for the resolution and consequences of the design and use of AT1 instruments.
 
Enrico Perotti will present his recent Policy Insight which proposes a framework prioritising bank recovery over resolution, aiming to help solvent but undercapitalised banks recover early, enhance supervisory powers' credibility, and ensure effective implementation of private bail-in requirements.