05 Jul 2018

Valuation reports in the context of banking resolution

Willem Pieter De Groen

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This study discusses the challenges concerning bank valuation reports in resolution. The resolution mechanism has three types of valuation reports, respectively to determine whether a bank is failing or likely to fail (valuation 1), to inform the use of the resolution tools including bail-in (valuation 2), and to ensure that the no creditor worse off condition is respected (valuation 3). The first experience with the preparation of valuation reports shows that even with the more formal procedures there are still substantial uncertainties regarding the outcome of these valuations due to organisational, legal and economic challenges. Additional mitigating measures should be considered to reduce the uncertainty.

Willem Pieter de Groen is Research Fellow and Head of Financial Markets and Institutions Unit at CEPS.

This material was originally published in a paper provided at the request of the Committee on Economic and Monetary Affairs of the European Parliament and commissioned by the Directorate-General for Internal Policies of the Union and supervised by its Economic Governance Support Unit (EGOV). The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. The original paper is available on the European Parliament's webpage (www.europarl.europa.eu/thinktank/en/document.html?reference=IPOL_IDA(2018)624418). (c) European Union, [2018].