The Implementation of the BRRD in Italy and its First Test: Policy Implications

Abstract

Eleven months after the deadline, in November 2015, Italy implemented the Bank Recovery and Resolution Directive. The detailed structure of the Directive drove most of the choices, but the Italian implementing acts are overall clearer than the Directive, especially in outlining the sequence of decisions that the competent authorities and the resolution authorities have to take with respect to a bank that is failing or likely to fail. Less than a week after their enactment, the new rules were applied to resolve four regional banks that until then had been under temporary administration. Although the resolution has been carried swiftly and in accordance with the principles of the Directive, this apparently minor case shows two lessons: that almost all banking crises will be handled with the new rules, liquidation being confined to micro-banks, and that the practical challenges of resolution actions are enormous.