The EU Bank Insolvency Framework: Could Less Be More?

The framework for bank crisis management in the Banking Union (BU) complies with multiple criteria. Each of these criteria is based on a sound policy rationale; however, when combined, they can generate unintended consequences that undermine effectiveness system, highlighting case fallacy composition. This paper suggests piecemeal reform not adequate to tackle framework’s shortcomings. A broader effort required streamline current into single rulebook, achieving through simplification. successful experience US failure provides useful benchmark. It shows generalized, if exclusive, reliance single, clearly defined, easily measurable and quickly actionable criterion – Least Cost Test makes it possible offer full protection taxpayers contain destruction value caused by failures, thereby safeguarding economy. We suggest its adoption BU would help frame common approach failing banks all sizes provide unifying force solution geographic institutional fragmentation set-up.