measures should not be confused with implementation of good governance
“ ”
Dr Daniel Staehelin is president of Insol Europe
It’s not my job to blame any country. I would say that several countries do not have a restructuring tradition. For example, England has more of a restructuring approach, but traditions differ from country to country. Companies have shifted their centre of main
interests to England in order to open a restructur- ing proceeding there. There is a large discussion going on now on whether such forum shopping should be prohibited. It’s easier to get a restruc- turing plan confirmed in England than in some other countries.
What complications arise during financial institution restructurings? The challenge is that banking is not constrained to Europe. Banks are operating worldwide. We need worldwide regulation so restructuring in one country may be effective in other countries out- side of the EU. We are at the beginning of the dis- cussion on that issue.
How is banking reform expected to impact bank restructuring plans? One point is the question of too-big-to-fail. This is one we discussed recently in Switzerland after
006 IFLR|RESTRUCTURING & INSOLVENCY
What do you think is the best way for the EU and its member states to deal with the sovereign debt crisis? What does this mean for lawyers? As an insolvency lawyer, I would say we have to make a cut and restructure these debts, but we do not have an official framework for restructuring state debt, so maybe we should create such a framework. Suggestions are being discussed on several levels. The official policy is that we cannot let Greece
go bust because the cost of a bankrupt Greece would be higher than the cost of bailing them out.
What are your thoughts on the use of austerity measures as a condition of sovereign bail-outs? I’m a lawyer, not an economist. There are good arguments for both spending- and saving-moti- vated policies. In Switzerland we introduced a special princi-
ple in our constitution in 2003 that limits spend- ing at the federal level. Public spending is limited according to a mathematic formula which is based on the economic cycle. This was really helpful in the last years. It’s one of the reasons why our public finances are very healthy.
www.iflr.com
Austerity
the bailout of UBS. We realised during the bank- ing crisis that we could not let one of our major banks go into bankruptcy because it would have meant the collapse of our whole economic sys- tem. That is now problematic because bankrupt- cy is a punishment for being too hazardous. Now these banks can do what they want and never fall into bankruptcy and that gives wrong signals to the managers of large banks.
What pan-European efforts are being made to end too-big-to-fail? There is discussion in the eurozone on the cre- ation of a whole European supervisory system called the single supervisory mechanism (or SSM) to prevent banking crises. [Under the plans,] a new body will be instituted with a seat in Frankfurt. The European body will supervise the large banks which are relevant for the system. It is certainly a step in the right direction even if it will not end the problem of too-big-to fail, because failure can always happen in a free market system. The only solution to ending the problem of too- big-to fail completely would be to divide big banks into smaller entities, but this would have other negative impacts on the market.
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