The harmonisation of insolvency rules for European banks was recently put on the table by Germany’s finance minister Olaf Scholz, together with other measures (such as a European deposit insurance scheme) destined to advance the banking union (see his position paper on the goals of the banking union). According to Minister Scholz:
The lack of harmonisation in this area complicates the resolution of banks with cross-border operations. This becomes particularly problematic when banks and creditors are better placed in proceedings under national insolvency legislation than they would be with a resolution in accordance with the Bank Recovery and Resolution Directive. When this happens, national insolvency legislation undercuts the provisions that are tailored to fit the specific set of interests at play when a bank is wound down.
What is more, the SRB also needs to take into account 19 different national insolvency regimes when performing a resolution due to the no-creditor-worse-off principle, which stipulates that no creditor may incur greater losses as a result of a resolution than they would have in national insolvency proceedings. This is complex, increases legal and compensation risks and results in groups of creditors receiving different treatment despite being fundamentally the same.
For this reason, we need a single European set of laws on bank insolvency.
Coincidentally (or not), a study on the differences between bank insolvency laws and on their potential harmonisation was recently published (the report and the executive summary can be found here). The abstract from the executive summary reads as follows:
The resolution framework set out under Directive 2014/59/EU (‘BRRD’) provides EU Member States with comprehensive and harmonised arrangements to deal with failing banks at a national level, and is complemented in the euro area by the Single Resolution Mechanism Regulation (SRMR) that sets out a euro-area-wide resolution framework. But under EU law, unlike in the United States, resolution does not function as a standalone substitute for national insolvency proceedings. This study identifies the national insolvency procedures applicable to banks and analyses key differences between them, notably concerning the circumstances according to which the application of reorganisation or winding-up procedures is triggered, the ranking of liabilities, and the available tools to manage bank crises. By highlighting the differences that can be found in the legislative regimes applicable at national level and determining how these national insolvency regimes differ from the resolution regime as set out in the BRRD and SRMR, the study assesses the potential disadvantages that result from the lack of harmonisation of these bank insolvency regimes. Taking these disadvantages into account, policy options are outlined to address these divergences. The feasibility, benefits, obstacles and impact of these options are discussed. In terms of future revision of the current framework, more clarity and predictability of the applicable regime should be sought, particularly for medium-sized banks, with a holistic approach to reform that also takes into account related policies such as those on state aid control and deposit insurance.
Papers from the INSOL Europe Academic Forum Annual Conference Athens, Greece, 3-4 October 2018
From 24 to 29 September 2019, the Inaugural YANIL Conference at 10 Years, the INSOL Europe Academic Forum and the INSOL Europe Annual Congress took place in Copenhagen, Denmark. The main topic of these conferences was the recently adopted European Restructuring Directive (what else?).
We will not try to summarise these discussions (a full report by Myriam Mailly, Jennifer Gant and Paul Omar will appear in the next edition of Eurofenix). We will try, however, to draw attention to the conference proceedings booklet of the Academic Forum 2018 which took place in Athens, Greece and which was published during this year’s conference. The topic of last year’s conference was “Party Autonomy and Third-Party Protection in Insolvency Law”, hence the title of this booklet. Continue reading “Party Autonomy and Third-Party Protection in Insolvency Law”
At the invitation of Corporate Finance Lab, Professor Katharina Pistor (Columbia Law School) presented her book The Code of Capital: How the Law Creates Wealth and Inequality at the KU Leuven in Brussels on November the 4th 2019. You can find the video’s of the introduction by Professor Dirk Heremans, the lecture by Professor Katharina Pistor and Belgian responses by Professor Ludo Cornelis, Professor Koen Geens and Professor Joeri Vananroye on YouTube.
Continue reading “The Code of Capital – Video of the book presentation at KU Leuven”
The Code of Capital: How the Law Creates Wealth and Inequality
The Code of Capital by Katharina Pistor has been creating a lot of buzz over the last months. As announced previously, Professor Pistor will present her book next Monday November 4 at 16h30 at the Brussels campus of KU Leuven. Please note that because of the high number of attendants the presentation has been moved to Auditorium 2215 (Stormstraat 2 / 2 rue d’Assaut, 1000 Brussels).
A short overview of the book by Professor Pistor herself can be found here (ProMarket, the blog of the Stigler Center at the University of Chicago). See here for an interview with her (Völkerrechtsblog). In a review on Law and Political Economy, Professor Samuel Moyn (Yale) writes: Continue reading “Next week: book presentation by Katharina Pistor in Brussels”
Conference at Maastricht University, October 25th. 2019
The Institute for Corporate Governance and Innovation Policies (ICGI) and Institute for Transnational Legal Research (METRO) at Maastricht University will host next Friday an interdisciplinary conference on ‘AGENCY THEORY IN THE 21st CENTURY’ at the Faculty of Law in Maastricht with Damla Bos (Maastricht University), David Cabrelli and Ewa Kruszewska (The University of Edinburgh), Joeri Vananroye (KU Leuven), Jean-Philippe Robé (SciencesPo Law School), Constantijn van Aartsen (Maastricht University) an Mieke Olaerts (Maastricht University).
Agency theory – the economic analysis of relationships between agents and principals – is influential and has spread well beyond its economic roots into a variety of disciplines, including law, political science, sociology, corporate governance and finance. It is used by scholars to design efficient institutions, structure individual incentives, prevent corporate corruption and compare institutional arrangements. Reliance on agency theory in these areas has, unfortunately, not prevented corporate scandals and suboptimal rates of trust in business and other institutions. The overarching aim of this conference is to address these issues in an interdisciplinary and international setting.
||Registration & coffee
||Introduction – Damla Bos, LLM – Maastricht University
||Prof. David Cabrelli and Dr. Ewa Kruszewska – The University of Edinburgh
“The Limits of Agency Theory”
||Prof. Joeri Vananroye – KU Leuven
“The Blind Spots of Agency Theory in Corporate Finance Law”
||Lunch Break in room B0.006
||Dr. Jean-Philippe Robé – SciencesPo Law School“Being Done with Milton Friedman”
||Constantijn van Aartsen, LLM – Maastricht University“Agency Theory in the 21st Century: Legitimate, Reductionist and Overapplied”
||Closing – Prof. Mieke Olaerts – Maastricht University
A post by guest blogger Marie Parys
In August 2019, the US national security advisor visited the UK bearing the news of a trade deal. Perhaps not as conspicuous as it was odd was his statement that a future US-UK free trade agreement could be done on a “sector-by-sector-basis”. WTO rules decree that legal free-trade agreements must cover “substantially all trade”. This renders sectoral trade liberalization impossible. Or does it? Despite Prime Minister Boris Johnson conceding that negotiating a UK-US free trade agreement will be a “tough old haggle”, he has stated that it is the “single biggest deal” the UK needs to do following Brexit. Would the UK and the US be willing to flaunt WTO rules to get to the golden goose of an albeit gradual free trade agreement? Are WTO rules binding and enforceable, and why do most Members follow recommendations of the WTO dispute settlement system? In other words: how sharp are the WTO’s teeth and why do they bite? Continue reading “Who’s afraid of the WTO?”
Papers from the INSOL Europe Academic Forum Annual Conference Athens, Greece, 3-4 October 2018
In the recently issued conference proceedings booklet “Party-Autonomy and Third Party Protection in Insolvency Law”, I published a paper called “The Road Towards Good Bankruptcy Governance: A Comparative Law and Economics Perspective”. The paper seeks to start the discussion on the topic of good bankruptcy (or insolvency) governance and to inspire idealistic researchers to become involved in this discussion. Three key aspects of good bankruptcy governance were dealt with in this paper.
First, an attempt was made to define the concept of “good bankruptcy governance”. This was later narrowed down to the following question: “In whose interest should the management of a corporation or insolvency estate act?”. A short comparative analysis of the US, the UK, Belgium and the Netherlands did not provide a clear answer.
However, some room for common ground could be found by Continue reading “The Road Towards Good Bankruptcy Governance: A Comparative Law and Economics Perspective”