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Working Paper

Bad banks in the EU: the impact of Eurostat rules

 At least 12 European Union member states used publicly created asset management companies (AMCs), otherwise known as a ‘badbanks’ to respond to the recent financial crisis. This tool remains an option for future bank resolutions under the EU Bank Recovery andResolution Directive. This working paper assesses the design of AMCs in the recent crisis and why their form has changed.

By: and Date: December 16, 2014 European Macroeconomics & Governance Tags & Topics

• At least 12 European Union member states used publicly created asset management companies (AMCs), otherwise known as a ‘badbanks’ to respond to the recent financial crisis. This tool remains an option for future bank resolutions under the EU Bank Recovery and Resolution Directive.

• We assess the design of AMCs in the recent crisis and why their form has changed. Through its role as definer of statistical concepts used under the Stability and Growth Pact, Eurostat has affected the design of AMCs. Increasingly stringent rulings on whether AMCs count as debt have pushed member states to create similar types of AMCs, namely those with majority private-sector ownership.

• We argue that privately owned AMCs act differently to publicly owned ones. In particular, private AMCs usually impose larger haircuts on the price they pay for the assets they acquire. This haspositive benefits for how profitable the AMC will be and how much it will help in avoiding the creation of zombie banks and zombie badbanks.

• There are important caveats. The effect of Eurostat’s accounting rules on decision-making is stronger in countries with more strained budgets. Also, when the public owns a failed bank, Eurostat rulesare likely to have little impact on AMC ownership decisions. Governments tend to use publicly owned bad banks to resolve publicly owned failed banks. This is because it is difficult to compel private sector involvement in these situations

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Policy Contribution

PC 12 2017COVER2

The global decline in the labour income share: is capital the answer to Germany’s current account surplus?

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Speakers: Guntram B. Wolff and Tony Barber Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
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Working Paper

Cover WP 2017_06

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Topic: European Macroeconomics & Governance Location: Danmarks Nationalbank
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Blog Post

B Coeuré - photo

Central bank communication in a low interest rate environment

Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at an event organised by Bruegel, Brussels, 31 March 2017

By: Benoît Coeuré Topic: European Macroeconomics & Governance Date: March 31, 2017
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Central bank communication in a low interest rate environment

At this event, we are pleased to welcome Mr. Benoît Coeuré, Member of the Executive Board of the European Central Bank at Bruegel.

Speakers: Benoît Coeuré and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 31, 2017
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