this <may not / must not> lead to resolution

4356

Senior Member
Russian
Hello. I have difficulty understanding this sentence.

When public support is used to address a capital shortfall identified in a stress test, this may not lead to resolution when it is needed to “remedy a serious disturbance in the economy of a member state and preserve financial stability.


If a lender gets as much money as it wants, why may it not be financially sound again? As I understand that is what a banking resolution is about - to fill a capital gap with whatever money. Perhaps "may" is used here to mean "must not"? What am I missing?

 
  • JamesM

    Senior Member
    Hello. I have difficulty understanding this sentence.

    When public support is used to address a capital shortfall identified in a stress test, this may not lead to resolution when it is needed to “remedy a serious disturbance in the economy of a member state and preserve financial stability.


    If a lender gets as much money as it wants, why may it not be financially sound again? As I understand that is what a banking resolution is about - to fill a capital gap with whatever money. Perhaps "may" is used here to mean "must not"? What am I missing?
    The lender may be financially sound after receiving the report but that may not fix the disturbance in the country's economy and preserve overall financial stability.

    In other words, just because it's good for the lender doesn't necessarily mean it's good for the country.
     

    4356

    Senior Member
    Russian
    The thing is that this phrase refers to an EU directive. "Resolution" is strictly used throughout the entire text as a financial term meaning "the restructuring of a bank". Are you sure that "resolution" in this question refers to the economy of a country?
     

    4356

    Senior Member
    Russian
    I think I am beginning to understand this so I'd like to ask somebody my question again so that my guess could be confirmed or discarded. This is just some extra context that can help see the whole picture:

    The Bank Recovery and Resolution Directive assumes that the need to give a bank “extraordinary public financial support” indicates that it’s “failing or is likely to fail,” triggering resolution. Yet the law also gives politicians an alternative for helping solvent banks.

    When public support is used to address a capital shortfall identified in a stress test, this may not lead to resolution when it is needed to “remedy a serious disturbance in the economy of a member state and preserve financial stability.”

    My guess:

    When public support is used to address a capital shortfall identified in a stress test, this may not trigger resolution when that resolution is needed to “remedy a serious disturbance in the economy of a member state and preserve financial stability.”

    :confused:
     
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