The rapid escalation in uninsured deposit runs in March 2023 led to bailouts and chaotic resolution, showing a clear limit to current prudential norms.

Since then, some reform proposals have focused on stronger ex-ante prudential measures, such as higher capital and liquidity norms (Admati et al.  2023), while others have suggested an expansion of public insurance coverage to corporate deposits (Heider et al.  2023), a view largely adopted in a current EU reform proposal aimed at increasing the use of the EU resolution process (Dewatripont et al.  2023).

In our view, higher buffers would be most effective but are likely to be resisted as costly, while extending insurance to corporate accounts has a high fiscal cost and would lead to more risk creation. In a new CEPR Policy Insight (Perotti and Martino 2024), we review specific lessons from the 2023 bank runs and make a case for stronger Pillar II power for contingent measures on capital and liquidity. Our aim is restore credibility to a timely intervention process, to favour the recovery of viable banks.