Law on Trial 2016: Can the EU Regulate a Financial Crisis?

This post was contributed by Daniele D’Alvia, MPhil Law student in Birkbeck’s School of Law. Here, Daniele considers the central question of a Law on Trial 2016 event being held on Thursday 16 June: “Can the EU Regulate a Financial Crisis?”

This year, Law on Trial – the School of Law’s l week-long programme of free-to-attend public lectures and panel discussions – will focus on the EU referendum. The annual showcase will run from Monday 13 to Friday 17 June 2016 and will bring together academic staff, recognised internationally as authorities in their field. Find out more

Law on Trial 2016

On the 23rd of May 2016 the international credit rating agency Moody’s downgraded – for the second time this year – Deutsche Bank’s ratings for unsecured senior debt to Baa2 two notches above junk status, and it has also cut the long-term deposit rating one notch from A2 to A3. The cut has occurred after the heavy loss that the German Bank has faced last year and its impossibility to guarantee internal capital generation by 2018.

In addition, since the 1st of January 2016 Europe has seen the implementation of a new ‘bail-in’ regime for banks (namely, the new rules are a result of the EU Bank Recovery and Resolution Directive), which requires the writing down of senior debt (bond instruments in particular) in case of a possible default or financial distress of banks. This circumstance has surely affected those assessments provided by Moody’s too.

Furthermore, the German Council of Economic Experts has recently proposed a new sovereign insolvency mechanism in order to overturn the financial principles of the post-war order in Europe. The proposal is centred on new ‘haircuts’ on holders of Eurozone sovereign debt and aims at matching the new-implemented rules enacted for banks under the EU Bank Recovery and Resolution Directive that have been mentioned above.

This has been done to restore the credibility of the ‘no-bailout’ clause in the Maastricht Treaty. The tax-payer does not have to suffer any loss under the new ‘bail-in’ culture, but what about the markets and the senior creditors? Indeed, under the new scheme bondholders will suffer losses in any future sovereign debt crisis before there can be any bail-out of the Eurozone by the European Stability Mechanism. The negative effects of such reforms have just manifested this year in January 2016 when the bondholders (i.e. senior debt) of the Portuguese bank Novo Banco have been written down under the new implemented scheme of ‘bail-in’ for banks in distress.

Indeed, these reforms are contributing to a ‘bond-running’ effect because the senior debt under these regimes is the first one to be written down. To this end, a new possible aggressive speculation by investors and economic crisis is just ready to start in Europe.

It really seems that currently in Europe the real question has shifted from how to stay in Europe to how to stay in the market. In other words, nowadays it is the politics of financial markets that governs politics at national governments level and not the other way round.

Hence, the rhetoric but essential question that Prof Michelle Everson has posed for the panel discussion that will be held this year at Law on Trial: “Can the EU Regulate a Financial Crisis?” Indeed, the panel discussion is focused on providing a possible answer by taking into account the global nature of financial risk, the limits of financial regulation as well as its effects in relation to both the management of risk (i.e. the sovereign and bank insolvency mechanisms) and its pricing (i.e. a bank in default).

Law on Trial 2016: The European Union at the Crossroads, runs at Birkbeck from Monday 13 to Friday 17 June. Book a free place here.

Find out more

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Birkbeck Graduate Research School Relaunches

This post has been contributed by Rima Amin, Registry Officer at Birkbeck.

To Brexit or not to Brexit, that was the question posed to students and speakers at the Birkbeck Graduate Research School’s (BGRS) “Relaunch” event on Monday, 23 May. The event hosted a Brexit debate followed by a drinks reception and an informal group discussion on the development of the Research School.

The BGRS is a network providing resources, skills workshops and social events to support students during their time at Birkbeck. These are currently provided through the BGRS website, academibirkbeck-entrance1.jpgc workshop calendar and email communications.

The BGRS is currently revising the services it provides, how it communicates and seeking further ideas on how it can be improved to meet research students’ needs better.

In his welcome speech Pro-Vice Master Julian Swann said “Tonight is about engaging in debate on Brexit which is an event of great topical interest to us all. Development of the research school is a priority for Birkbeck, so along with the debate tonight we look forward to having you give us your views about how to create a stronger community for research students.”

Chaired by Professor Rosie Campbell from Birkbeck’s Politics Department, the debate began with Ben Harris-Quinney from the Leave side making his case saying: “Research students are a crucial group who can find great opportunity in Brexit as they are people ready to engage in the world with ideas.”

He said that Britain is a bigger contributor of academic research opposed to its European counterparts inferring that research students are currently giving more than they are gaining.

Next was the turn of Lord Richard Balfe from the remain side who began by criticizing campaigners on both sides of Brexit who treat the referendum as though Britain is going to end if they don’t get their way.

Lord Balfe spoke of Britain in the 1950’s where racism was rife and signs saying “No dogs. No Irish” were visible on the streets. He said that Britain had come a long way since then and migrants have played a key role to the current well-functioning economy in Britain.

The students raised challenging insights to both speakers. Lord Balfe was questioned over the lack of transparency over decision-making in European Parliament compared with British Parliament.

The conclusion from the remain drapeaux européensside: “One person’s red tape is another person’s working rights- we should be proud of what we have achieved.” And that from the leave side: “With champagne receptions and lobster dinners, the EU can appear glamourous, but when you see through it, you realise democracy is more effective when local.”

The Chair of the debate thanked the speakers and the questions from the students calling the contributions “a much richer discussion than what we can find in the papers.”

Research student Ekua Agha said “The debate was extremely innovative and provoked a lot of thought on the issues. The informal setting but formal discussion was struck at a nice balance.”

Birkbeck Graduate Research School would like to thank Ben Harris Quinney, Lord Richard Balfe and all attendees.

It’s not over.

If you couldn’t make last night’s debate, we still want to hear your thoughts on how we can develop the research school. Here are the questions we asked research students at the event. Please send your thoughts to researchstudentunit@bbk.ac.uk. 

1. What do you want the Graduate School to be/do?
2. What’s the best thing about studying at Birkbeck?
3. If you could change 1 thing about your time at Birkbeck, what would it be?
4. How do you want to find out about training & events?
5. What do you think about tonight’s event?/Ideas for future events?

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