The impact of the Bank Recovery and Resolution Directive (2014/59/EU) on Maltese registered less significant banks

Abstract

After the catastrophic events of the post-September 2008 financial crisis it became clear in almost all countries of the world that there was an absence of clarity on the best way to respond to a distressed banking sector; and that certain tools were needed to deal with failing banks without leaving a huge impact on a nation’s economy. Since application of the Bank Recovery and Resolution Directive (BRRD), at national and international levels have been developed such bank saving and/or dissolution regimes, and these primarily to ensure that taxpayers’ do not have to bail out money repeatedly. Authorities now have a set of tools and the power which allow them to intervene early and rapidly in an unstable institution, so as to guarantee its continuity. For certain banks this can be accomplished through normal insolvency procedures, however a few banks are too fundamentally significant and interconnected in an economy to be permitted to be liquidated. Resolution may be essential to make some banks safer and less likely to fail. In remarkable circumstances the Single Resolution Fund (SRF), financed by the banking sector itself, can be accessed.