A widespread term used in connection with the financial crisis that followed the subprime crisis, meaning that the central bank or the state provides assistance to failing banks in order to save them from insolvency and thus prevent damage to customers. In the EU as a whole, banks were rescued through measures that in the end amounted to around thirteen percent of the European Union’s gross domestic product. – The public was widely suspicious of the bank bailout, and even among the institutions, there was criticism that it meant that banks acting carelessly and haphazardly did not have to answer for their bad decisions. In general, this measure risks sending the wrong signals, namely that bank managers will take irresponsibly high risks in reliance on a bailout. Bank bailouts also prevent healthy international competition among institutions. Ailing or poorly managed banks backed by strong governments could force healthy, best-managed competitors out of the market. – In a market economy, it is never possible to rule out bank failure, especially since the event of such orderly failure has an important disciplining and steering role. – See resolvability, resolution mechanism, unified, investment liability, bailout, bank, systemic, bank bailout law, bank testament, banking union, bazooka, depositor liability, G-Sifi, creditor priority, moral hazard, emergency fund for crisis banks, rescue, shadow state, stability fund, European, too big to fail principle, zombie bank, forced convertible bond.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/