Reflecting the pivotal part central banks play in macro-prudential supervision, the ESCB, consisting of the ECB and the national central banks, will play a leading role in the European Systemic Risk Board (ESRB), which is to be established in the next few weeks.
Textbook advice has not always proved easy to implement. That advice has been to recognise losses early and ensure prompt recapitalisation, ideally from the market. Where a bank has lost all of its capital it needs to be resolved, with shareholders losing their investment and debt-holders (apart from insured depositors) also assuming losses as necessary following the normal priority of claims.