The Strategic Importance of Public Recapitalisation in Banking Resolution, What Ireland Can Tell

Abstract

104 Recapitalisation of banks, as well as the whole banking resolution process, was fully public during the 2008 financial crisis. The Single Resolution Mechanism shifted from this approach and created a public-private system, where private individuals and entities can be called in to fund recapitalisation (bail-in). This article argues that recapitalisation (and banking resolution as a whole) should be fully public so it can be rapid, negotiation-free, and in the best interest of the State. The 2008 Irish recapitalisation illustrates well the rewards of having public recapitalisation, while it also tells where improvements are needed to protect recapitalisation process and taxpayers. Currently, the Single Resolution Mechanism has different recapitalisation methods, which creates some complexity and overlaps.