Quarterly Journal of Austrian Economics

Quarterly Journal of Austrian Economics 19, no. 1 (Spring 2016): 116–120

The most recent financial crisis has engendered various actions by institutions aiming—or at least pretending to aim—to end the crisis and to stabilize the economy in general and the banking sector in particular. Not only have central banks flooded the markets with cheap money, but governments have also introduced new regulations intended to prevent the banking sector and, consequently, the entire economy from blundering into another crisis. These initiatives will in fact make everything worse, or are—at best—pointless. Apart from revised rules for banking supervision (“Basel III”), laws concerning the restructuring or formal liquidation of banks were passed in several countries. In Germany, the government created a Banking Restructuring Act (“Gesetz zur Reorganisation von Kreditinstituten”) aiming at 1) the successful restructuring of (especially) so-called “systemic” banks without affecting the stability of the banking system as a whole and 2) the involvement of both equity and debt holders in solving a bank’s crisis rather than the taxpayer.

While the German Banking Restructuring Act has been the subject of thorough jurisprudential research, David Rapp was the first to analyze the Banking Restructuring Act from a business economics perspective, based upon Austrian insights.