The bank insolvency directive (directive 2001/24/EC) halfway between Scylla (politics) and Charybdis (Finance): A comparative and empirical analysis

Politics, finance and bank insolvency procedures! It is a trite statement that Britain, in 2008, was caught off guard by the financial collapse of its banking sector. The distinct lack of bank insolvency procedures and the scramble to reshape overnight the relevant legal instruments bears testament to the weakness of the system at that time. Yet, this paper, through an analysis that is both doctrinal and empirical, seeks to boldly challenge this assertion. Thus, the lack of bank insolvency procedures, also in part due to the weak harmonisation of the Bank Insolvency Directive (Directive 2001/24/EC), presented the British Government with a stroke of luck and the good fortune to be in a position to re-organise in a more flexible way its banking industry. Accordingly, the significant power left in the hands of the Government, and the de facto public money bail-out, contributed tellingly to the comparatively successful performance that the UK banks are currently demonstrating. Nor has Britain departed from the legacy of the financial crisis: the new Special Resolution Regime, shaped by the Banking Act 2009, still leaves room for significant political discretion. The comparison with Italy, a traditional counterpart manifesting opposing national characteristics, particularly in terms of legal systems and cultural background, may confirm this assumption, rather than dispel it. Ultimately, there are many of the opinion that the legislative framework in this area should be revamped so that a proper harmonisation of the Bank Insolvency Procedures is achieved. The conclusions drawn in this contribution may, however, present a more prudent course of action which is undertaken at the pace of the proverbial snail rather than with the velocity of Achilles.