Today, the Bank of Italy published a new Note on Financial Stability and Supervision on the FDIC bank crisis management, and experiences and lessons for the Banking Union, prepared by Giovanni Majnoni D'Intignano, Andreas Dal Santo and Michele Maltese.
In this Note, the authors provide useful ideas for the ongoing debate in Europe on the revision of the rules on bank crisis management and on deposit insurance by examining the role that the Federal Deposit Insurance Corporation (FDIC) plays in the USA. They believe that the FDIC has been very effective in speeding up the process and reducing the costs of bank failures, although the larger and more complex banks have required the joint intervention of the US Treasury and other institutions.
Four factors explain why the FDIC has performed better than the European Banking Union: (i) the grouping of different functions under a single authority; (ii) a single procedure that can be applied flexibly to all banks, regardless of their size; (iii) the possibility of using the deposit insurance fund, also to protect uninsured depositors, based on the 'least cost' principle, which means that alternatives to the repayment of deposits can only be used when they cost less than liquidation would; and (iv) the lack of constraints under antitrust regulations.
