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Andrew Campbell and Paula Moffatt

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Andrew Campbell and Paula Moffatt

The importance of early intervention with regard to a financially troubled institution has long been recognised. The supervisory authorities in the US recognised this early on and have used the concept of ‘prompt corrective action’ for many years. It has repeatedly been demonstrated in banking crises that the failure to act as soon as a problem is discovered generally means that the value of financially distressed banks reduces very quickly and that crises develop when they could have been avoided, or their effects limited. This chapter examines the European response to early intervention following the banking crisis that began just over ten years ago and which affected many European banks. The chapter focuses on the early intervention measures in the Bank Recovery and Resolution Directive which has now come into effect throughout EU.