...If investors and market observers had any doubt about whether the eurozone authorities would use their resolution powers to deal with a failing, but systemically important bank, last week's events have conclusively dispelled this notion. On June 6, 2017, the European Central Bank (ECB) determined that Spain's sixth-largest financial institution--Banco Popular Espa±ol S.A., which had assets of 147 billion--was nonviable due to a liquidity squeeze, and the Single Resolution Board (SRB) stepped in to resolve it. Investors woke up to find that Banco Popular's subordinated creditors and previous shareholders had been bailed-in and wiped out, and that Banco Santander S.A. now owned it. Although no bank wanted to be the first to experience resolution through the ECB and SRB, at first sight, the case seems to boost the credibility of the eurozone resolution authorities and EU policymakers. The authorities have spent years devising the EU-wide bank resolution framework and implementing it, in a...
