Paper by Prof Avgouleas, informs EU banking crisis debate

A paper written by Edinburgh Law School's Chair in International Banking Law and Finance, Prof Emilios Avgouleas and LSE's celebrated economist Prof Charles Goodhart has been leading the way in the public debate about how to deal with the EU banking crisis.

The paper, “A critical evaluation of bail-in as a bank recapitalization mechanism” which was co-authored by LSE's Prof Charles Goodhart, was originally presented by Professor Avgouleas at the Bank of International Settlements (BIS) at the annual conference of the Basel committee on Bank Supervision in 2015 and subsequently at a special seminar at the Bank of England. It was also presented by Prof. Goodhart at the Chicago Federal Reserve and the European Stability Mechanism. Professors Avgouleas and Goodhart have strongly opposed an indiscriminate application of transatlantic bail-in regimes in favour of a more nuanced and restrained approach.

At the time of the paper’s publication the authors went against very strong currents within policy-making circles and the prevailing regulatory policy debate. To many the paper has found justification in the precipitous falls in European banking shares in the beginning of 2016, which are widely attributed to the threat of an indiscriminate application of the bail-in provisions of European law.

The paper has attracted interest from several sources including the media, who heavily reference the article. In February 2016, leading German newspaper, Die Welt, featured an article 'In der Gerechtigkeitsfalleon' on the 2016 turmoil in EU banking markets, which draws heavily on the paper, discussing and summarising the issues raised by Avgouleas and Goodhart.

The full article can be read online at http://www.welt.de/print/wams/wirtschaft/article152460929/In-der-Gerechtigkeitsfalle.html

The final version of the paper was published following a decision by its editors as the inaugural article of the Oxford Journal on Financial Regulation:

J Financial Regulation (2015) 1 (1): 3-29 DOI: http://dx.doi.org/10.1093/jfr/fju009 February 2015 (27 pages)

In a commentary by Stefano Micossi (chairman of Assonime – the Italian CBI equivalent), 'Banking crisis yet again and how to fix it'. https://www.ceps.eu/publications/banking-crisis-yet-again-and-how-fix-it
Avgouleas and Goodhart’s view is fully endorsed.

The original paper by Avgouleas and Goodhart can be viewed at http://www.bis.org/bcbs/events/bartnf/avgouleasgoodhart.pdf