Second, the arrangements for bail-in could be more rules-based. The ECB has always argued for discretionary exclusions from bail-in to be limited so as to make the rules of the game clear for global investors. The Council approach gives the resolution authority powers to discretionarily exclude any type of liability for reasons of impossibility within a certain time frame, or to avoid wide-spread contagion.
In our view, there would have been a benefit in defining ex ante the categories of liabilities that could have been excluded. This means that investors will lack certainty about how the new framework will be used, and in my view it may slow down the process of reducing financial fragmentation.