<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The post 2008 financial crisis reform package includes the bank resolution framework. Among other measures, it foresees that failing banks should be left under insolvency proceedings, unless they meet their salvage is in the public interest. The Bank Recovery and Resolution Directive defines the public interest, providing guidance that resolution authorities need to take into account when deciding between resolution (continuation of the bank’s activity) or liquidation when a bank fails. While the guidance stems for a legal act, the concept can be mathematically modelled together with the underlying decision making process. To date, only parts of the resolution public interest or the concept of financial crisis have been modelled. The public interest assessment and underlying decision process, to the knowledge of the author, have not been mathematically modelled. This paper proposes a mathematical model for the public interest assessment as provided under the European resolution framework. While this seems to be the first such effort, it should be seen as a basis for further critical thinking that should allow more advancements that would ultimately facilitate the assessment and to provide insights for its intended users. The model can be easily implemented by practitioners by selecting or adding more relevant variables and most importantly by following their own calibration. The model is designed in a way to enable integration in an artificial intelligence deployment on data that authorities collect on the economies.</p>
</abstract>

The post 2008 financial crisis reform package includes the bank resolution framework. Among other measures, it foresees that failing banks should be left under insolvency proceedings, unless they meet their salvage is in the public interest. The Bank Recovery and Resolution Directive defines the public interest, providing guidance that resolution authorities need to take into account when deciding between resolution (continuation of the bank’s activity) or liquidation when a bank fails. While the guidance stems for a legal act, the concept can be mathematically modelled together with the underlying decision making process. To date, only parts of the resolution public interest or the concept of financial crisis have been modelled. The public interest assessment and underlying decision process, to the knowledge of the author, have not been mathematically modelled. This paper proposes a mathematical model for the public interest assessment as provided under the European resolution framework. While this seems to be the first such effort, it should be seen as a basis for further critical thinking that should allow more advancements that would ultimately facilitate the assessment and to provide insights for its intended users. The model can be easily implemented by practitioners by selecting or adding more relevant variables and most importantly by following their own calibration. The model is designed in a way to enable integration in an artificial intelligence deployment on data that authorities collect on the economies.

A modelling proposal for the public interest under the European resolution framework

Proceedings of the International Conference on Business Excellence

This work is licensed under the Creative Commons Attribution 4.0 International License.

The post 2008 financial crisis reform package includes the bank resolution framework. Among other measures, it foresees that failing banks should be left under...

A modelling proposal for the public interest under the European resolution framework

Publié en ligne: 31 déc. 2021

Pages: 1208 - 1218

DOI: https://doi.org/10.2478/picbe-2021-0112

Mots clés
bank resolution, regulatory, public interest, banking, central banking, model, BRRD

© 2021 Gabriel Razvan Mitrache, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

A modelling proposal for the public interest under the European resolution framework

Publié en ligne: 31 déc. 2021

Pages: 1208 - 1218

DOI: https://doi.org/10.2478/picbe-2021-0112

Mots clésbank resolution, regulatory, public interest, banking, central banking, model, BRRD

© 2021 Gabriel Razvan Mitrache, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Mots clés
bank resolution, regulatory, public interest, banking, central banking, model, BRRD