From Bailouts to Modern Strategies: Prevention and Resolution of Bank Crises

This thesis addresses the issue of bank crisis resolution and prevention. Banks occupy a specific position in the economy. Hence, their problems must be approached differently. The paper aims to analyse the institutional change in the approach to bank resolution since the 2008 financial crisis. Before and during the crisis, banks were typically rescued by the state (bail-out). What is more, EU member states did not act in a coordinated manner when rescuing banks. This thesis highlights the shift in approach, where current focus is placed on prevention and identification of systemically important banks. Furthermore, the contemporary framework is built on the principle that shareholders and creditors should bear losses and contribute to the recapitalization of banks first (bail-in). Taxpayers' money is now considered a last resort, to be used only when all other resolution tools have been exhausted. However, the findings of this research reveal that this principle is not always strictly adhered to. Public funds for bank bail-outs are still sometimes utilized earlier than intended, before all alternative resolution mechanism have been fully exploited.