In a market in which technological innovations make bank branch networks less attractive to potential investors, crisis resolution has become more difficult. European regulations preclude the use of the resolution tool for small banks, on the assumption that it is not in the public interest to do so.
Therefore, in the absence of interested purchasers, there would be no alternative but to liquidate these banks. The impact, even reputational, on the entire category of small banks would be significant. Good corporate governance and access to the capital markets are indispensable for avoiding a crisis. In turn, adequate skills and rigorous monitoring of conflicts of interest are needed for high-quality governance.