a column by Maryam Malakotipour, Enrico Perotti and Rolef de Weijs for VOX: CEPR’ Policy Portal
In 2019 the EU published its directive on bankruptcy reform, which national parliaments must now consider.
This column argues the Relative Priority Rule that the reforms propose is unfair, would reduce financial stability, and may lead to a regulatory race to the bottom. The rule would aggravate risk-taking because returns would be captured by shareholders while losses would be borne by unsecured creditors.
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Labels:
bankruptcy, restructuring, stability, regulation, debt, creditors,
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