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Who Pays for Bank Insolvency 1st Edition David G.
Mayes Digital Instant Download
Author(s): David G. Mayes, Aarno Liuksila (eds.)
ISBN(s): 9784720043325, 4720043321
Edition: 1
File Details: PDF, 3.20 MB
Year: 2004
Language: english
Who Pays for Bank Insolvency?
Also by David G. Mayes and Aarno Liuksila
IMPROVING BANKING SUPERVISION (with Liisa Halme)

Also by David G. Mayes

PUBLIC INTEREST AND MARKET PRESSURES (with W. Hager, A. Knight and
W. Streeck)
MODERN PORTFOLIO THEORY AND FINANCIAL INSTITUTIONS
(with D. C. Corner)
SOCIAL EXCLUSION IN EUROPEAN WELFARE STATES (with R. Muffels and
P. Tsakloglou)
SOCIAL EXCLUSION AND EUROPEAN POLICY (with J. Berghman and R. Salais)
THE EVOLUTION OF THE SINGLE EUROPEAN MARKET
SOURCES OF PRODUCTIVITY GROWTH
THE SINGLE MARKET PROGRAMME AS A STIMULUS TO CHANGE
(with P. E. Hart)
INEFFICIENCY IN INDUSTRY (with C. Harris and M. Lansbury)
THE EVOLUTION OF RULES FOR A SINGLE EUROPEAN MARKET (editor)
1 Industry and Finance
2 Rules, Democracy and the Environment
3 Social and International Issues
FOREIGN DIRECT INVESTMENT AND TRANSITION (editor with G. Csaki and
G. Foti)
THE EXTERNAL IMPLICATIONS OF EUROPEAN INTEGRATION (with others)
ACHIEVING MONETARY UNION (with A. Britton)
A NEW STRATEGY FOR SOCIAL AND ECONOMIC COHESION AFTER 1992
(with I. Begg)
THE EUROPEAN CHALLENGE
A STRATEGY FOR THE ECU (with A. Britton and Ernst & Young)
SHARPBENDERS (with P. Grinyer and P. McKiernan)
INTEGRATION AND EUROPEAN INDUSTRY (with M. Macmillen and P. van Veen)
THE EXCHANGE RATE ENVIRONMENT (with S. Brooks and K. Cuthbertson)
APPLICATIONS OF ECONOMETRICS
THE PROPERTY BOOM
INTRODUCTORY ECONOMIC STATISTICS (with A. C. Mayes)
Who Pays for Bank
Insolvency?

David G. Mayes
and

Aarno Liuksila

with
Thorsten Beck, Bethany Blowers, Henk Brouwer, Peik Granlund,
Christos Hadjiemmanuil, Gerbert Hebbink, Eva H. G. Hüpkes,
∂sson, Gary H. Stern, Sandra Wesseling
Eigil Mølgaard, Jón Sigur´
and Garry Young
Selection and editorial matter © David G. Mayes and
Aarno Liuksila 2004
Individual chapters © the contributors 2004

The views expressed in this publication are those of the authors and are
not necessarily those of the Bank of Finland.
All rights reserved. No reproduction, copy or transmission of this
publication may be made without written permission.
No paragraph of this publication may be reproduced, copied or transmitted
save with written permission or in accordance with the provisions of the
Copyright, Designs and Patents Act 1988, or under the terms of any licence
permitting limited copying issued by the Copyright Licensing Agency, 90
Tottenham Court Road, London W1T 4LP.
Any person who does any unauthorized act in relation to this
publication may be liable to criminal prosecution and civil claims
for damages.
The authors have asserted their rights to be identified
as the authors of this work in accordance with the Copyright,
Designs and Patents Act 1988.
First published 2004 by
PALGRAVE MACMILLAN
Houndmills, Basingstoke, Hampshire RG21 6XS and
175 Fifth Avenue, New York, N.Y. 10010
Companies and representatives throughout the world
PALGRAVE MACMILLAN is the global academic imprint of the Palgrave
Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd.
Macmillan® is a registered trademark in the United States, United Kingdom
and other countries. Palgrave is a registered trademark in the European
Union and other countries.
ISBN 978-1-349-51339-0 ISBN 978-0-230-52391-3 (eBook)
DOI 10.1057/9780230523913
This book is printed on paper suitable for recycling and made from fully
managed and sustained forest sources.
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Who pays for bank insolvency?/[edited by] David G. Mayes, Aarno Liuksila.
p. cm.
Includes bibliographical references and index.

1. Bank failures – Government policy. 2. Banks and banking – State

supervision. 3. Banking law. 4. Intervention (Federal government).
I. Mayes, David G. II. Liuksila, Aarno.
HG1725.W47 2004
332.1—dc21 2003056404

10 9 8 7 6 5 4 3 2 1
13 12 11 10 09 08 07 06 05 04
Contents

List of Tables vii

List of Figures viii

Preface ix

Acknowledgements xii

Notes on the Contributors xiii

Introduction 1

Part I The Problem and the Proposed Solution

1 An Overview of the Issues 27
David G. Mayes

2 The New Approach to Orderly Bank Exit:

Questions and Answers 70
Aarno Liuksila

Part II How Big is the Problem?

3 Disclosure as a Cure for Moral Hazard:
Necessary but Insufficient 109
Gary H. Stern

4 The Incentive-Compatible Design of Deposit

Insurance and Bank Failure Resolution:
Concepts and Country Studies 118
Thorsten Beck

5 Small Countries, Large Multi-Country Banks:

A Challenge to Supervisors – the Example of
the Nordic-Baltic Area 142
Jón Sigurðsson

6 The Economic Impact of Insolvency Law 164

Bethany Blowers and Garry Young

v
vi Contents

7 Do Bank Exit Regimes Affect Banking Conditions? 180

Peik Granlund

Part III Approaches to Solving the Problem

8 A European Approach to Banking Crises 205
Henk Brouwer, Gerbert Hebbink and
Sandra Wesseling

9 Avoiding a Crisis: Lessons from the Danish

Experience 222
Eigil Mølgaard

10 Learning Lessons and Implementing

a New Approach to Bank Insolvency
Resolution in Switzerland 242
Eva H. G. Hüpkes

11 Bank Resolution Policy and the

Organization of Bank Insolvency
Proceedings: Critical Dilemmas 272
Christos Hadjiemmanuil

Appendix 1 The Proposed Approach to Bank

Insolvency Legislation 331
David G. Mayes, Liisa Halme and Aarno Liuksila

Appendix 2 The Basel Committee

Guidance on Weak Banks 364

References 373

Index 381
List of Tables

1.1 Alternative calculations of the costs of the 1990s crisis in

Finland 49
5.1 Number of commercial banks in the Nordic countries 144
5.2 Number of savings banks and cooperative banks in the
Nordic countries 145
5.3 Number of branches in the Nordic countries 145
5.4 Number of employees in the Nordic countries 146
5.5 Number of banks in the Baltic countries 147
5.6 Number of foreign-owned banks in the Baltic countries 147
5.7 Market share of the three largest banks in each
Nordic country 148
5.8 Market share of the three largest banks in each
Baltic country 148
5.9 Largest bank in each Nordic country: assets/GDP of
parent company’s home country 150
5.10 Largest bank in each Nordic country: assets/GDP of
country of operation 150
5.11 Largest bank in each Baltic country: assets/GDP of
home country 152
7.1 Financial centre grades according to the Financial
Assistance Index 185
7.2 Financial centre grades according to the Bank-Creditor
Rights Index 186
7.3 Bank bond spreads 1999–2002 192
7.4 Regression results 193
8.1 Number of MFIs in the EU 214
9.1 Summary of the problems that arise in bankruptcy or
government support 234
9.2 ‘Core Principles for a Sustainable Banking
System’ – Danish version 236

vii
List of Figures

1.1 Decision tree in crisis resolution 32

1.2 Finland’s GDP 49
5.1 Number of commercial banks in the Nordic countries 143
5.2 Number of savings banks and cooperative banks in the
Nordic countries 144
5.3 Bank branches and employment in the banking
sector of the Nordic countries 144
5.4 Number of banks in the Baltic countries 146
5.5 Number of foreign-owned banks in the Baltic countries 147
5.6 Concentration in the banking sector of the
Nordic countries: market share 148
5.7 Concentration in the banking sector of the
Baltic countries: market share 148
5.8 Concentration in the banking sector of the
Nordic countries: largest bank by country of operation 151
5.9 Concentration in the banking sector of the
Nordic countries: largest bank by parent company 151
5.10 Concentration in the banking sector of the
Baltic countries: largest bank 152
6.1 Bankruptcies in Scotland compared with England
and Wales 169
8.1 Share of five largest credit institutions in total assets 214
8.2 Interbank claims as a percentage of total assets 215
8.3 Percentage of holdings with insurance corporations
and pension funds of intermediated assets 216
8.4 Claims on banks in other euro area countries 217
8.5 Cross-border claims on euro area banks 217
8.6 Share of financial conglomerates in bank deposits 218
9.1 The prudential System for the banking sector 226

viii
Preface

This book addresses two concerns. The first is that, should large and
complex banks operating in more than one country get into difficulty,
adequate systems are not in place for organizing their orderly resolution.
The second consequential concern is that, if suitable exit mechanisms do
not exist, such banks will be tempted to run themselves on the basis that
they will be bailed out by the authorities, using taxpayers’ money, if dif-
ficulty arises – a typical example of reciprocal ‘moral hazard’. This could
also have adverse consequences for the rest of the economy and smaller
banks in particular.
The problem occurs where banks operate as a grouping under cen-
tralized management yet their parts are subject to resolution as separate
legal entities. This is particularly acute for the smaller countries of
Europe, where there is an important mismatch between bearing the eco-
nomic consequences of bank failures and adequate sharing of the legal
powers to resolve such groupings in the public interest of the countries
involved. The recent Winding-up Directive only addresses that part of
these problems which relate to the exit liquidation and reorganization
of branches of an EEA bank located in other EEA countries. The
Directive relates to the exercise of concurrent jurisdiction by ‘host’ and
‘home’ countries in the case of a single legal entity. With the coming
expansion of the EEA this concerns at least 20 countries.
There are two consequences in these circumstances. First, despite the
increased peer pressure at intergovernmental level in the form of the
Basel Committee discussions for improved management of risks by
banks themselves, an important challenge to the stability of the eco-
nomic system may remain. There are already worries that the Basel pro-
posals themselves may increase the overall volatility of the financial
system. If the authorities are not in a position to organize bank exits in
the event of substantial problems then there will be an incentive for
banks to take on ‘correlated risks’. This is the problem of herding – if too
many banks get into difficulty at the same time then the taxpayer will
bail the banks out because too many simultaneous failures would
threaten the stability of the financial system as a whole. The second
consequence is that the bailing out of large banks by the taxpayer inher-
ently results in substantial issues of competition and equity. The con-
sequences of realized risks may be shifted from those who have been

ix
x Preface

paid for taking them to those who have not and the playing field for fair
and efficient competition among banks may be tilted.
A key problem that emerges is delay. Delay tends to permit increasing
losses. If handling a large problem bank is difficult, there are strong
incentives for the supervisory authorities to delay action in the hope that
the problem will right itself, particularly that the private sector will be
able to come up with a solution. Unfortunately that optimistic outcome
only occurs some of the time and forbearance is likely to encourage risk-
taking and increase losses. Management in difficulty may already be fac-
ing their maximum loss in the sense of their jobs and share options.
When the problem is relatively small, several approaches to its solution
are possible; as it grows over time, only the taxpayer has the resources to
cover the eventual losses and the problem acquires the label ‘systemic’.
Although provisions for the orderly exit of banks that have ceased to
comply with the conduct-related conditions for registration are in place,
they have been impossible to apply in practice to close larger banks that
are failing or have failed in the economic sense. Sanctions other than
withdrawal of authorization appropriately apply to all banks for dis-
obeying instructions or breaching their own undertakings vis-à-vis reg-
ulators. The principal difficulty is one of law which is based on a
demonstrated disruption of payments rather than the economics of
intervention based on valuation.
The main business of the failed bank needs to continue uninterrupted
even if the legal ownership and management of the bank are changed in
the process. An efficient coordinated system of managing this transition
under rules that are known in advance needs to be in place. Such a sys-
tem exists in the United States where a single authority is required to act
promptly under public law to liquidate the assets and liabilities of
insured depository institutions in a way that minimizes the losses incurred
by the deposit insurer. Other possibilities exist and are discussed in the
Introduction. Chapters 6 and 11 argue strongly in favour of the ‘London
Approach’ in which the authorities rely on the equity courts for case
administration (judicial liquidations and reorganizations).
We, however, offer a simple transparent system based on a version of
the US public law approach, which could be widely adopted, particularly
by small countries that are home or host to large geographically dis-
persed banking groups. The authorities are required to act quickly to
effect an exit of the failed bank under a scheme that restructures its
assets, liabilities and equity as if it had been liquidated up-front, helping
to transform it without liquidation into a solid bank that can continue
the main business without interruption. This scheme of reorganization
measures was originally proposed in a companion book, Improving
 Preface xi

Banking Supervision (David Mayes, Liisa Halme and Aarno Liuksila,

Palgrave, 2001). Here we offer more detail and answers to common ques-
tions about the scheme, and augment that with discussion and appraisal
of the issues it raises by experts in the field who come from a variety of
backgrounds. However, the point remains the same – to have a structure
where the incentives for all those involved – shareholders, supervisors,
depositors alike – are directed towards having both prudently run banks
and an efficient and smoothly running system in which the public has
confidence, innovative and competitive banks are born and grow and
the weak decline, are acquired or close.
Fortunately, many of the risks highlighted in this book have yet to be
realized and it is our hope in writing it that action will be taken suffi-
ciently quickly that they remain theoretical possibilities rather than
reality. However, the substantial rash of banking crises over the last
20 years suggests that problems remain. The threats are particularly
clear from a Finnish perspective. It is only a decade since Finland
suffered an economic crisis, which was by most measures more severe
in its impact than the Great Crash of 1929. Excessive risk-taking by
banks, weak regulation and supervision and destabilizing macroeco-
nomic management were major contributors to the difficulties, even if
the collapse of the former Soviet Union may have been the final straw
that precipitated the crisis. While the severe problems might have been
avoided by running a more prudent system, as existed nearby in
Denmark at the time, the key outcome was that taxpayers’ funds were
used in large measure to bail out the banks and an unconditional guar-
antee of the availability of reserves for banks was issued to bank credi-
tors and depositors. The financial consequences are likely to persist for
another decade. The expectation of a future bailout, should there be
another crisis, will also remain, whatever the rhetoric to the contrary,
unless a credible framework for avoiding it is put in place.
Furthermore since the crisis, the banking system in Finland has
become both highly concentrated and international. The Finnish
authorities can no longer act on their own to resolve the problem. They
have to act with the authorities of the surrounding countries which are
also affected. This is a daunting prospect as it is frequently necessary to
act rapidly. The problem is by no means unique to Finland. As the book
explores, the largest Swiss banks are so big compared with their home
country that they are in a very real sense too big for the authorities to
save, as opposed to the continuing traditional concern of also being too
important to the stability of the financial system to be allowed to fail.

DAVID G. MAYES
Acknowledgements

We are particularly grateful to the contributors to this volume who

provided a vigorous opportunity to debate and therefore refine the ideas
we have proposed. While they are in no way implicated in our views
their role has been crucial. The views expressed here and in the contin-
uing discussions are, of course, personal and do not necessarily reflect
those of the organizations for which they work. We were keen to get the
best international team of experts in this field, mixing both economists
and lawyers, academics and practitioners drawn from the different reg-
ulatory traditions across the world, particularly the USA, UK, continen-
tal European and Nordic countries. They were helpful, not just in
commenting on our chapters, but on each others’.
The Bank of Finland too has been instrumental in encouraging and
providing the resources for this work, particularly in organizing the
workshop in November 2002, at which first versions of the chapters
were discussed. Helsinki produced some unseasonably cold weather to
encourage a focus on the scholarship. We owe a debt to numerous col-
leagues in the Bank, including Karlo Kauko, Tuomas Takalo and Juha
Tarkka, and to Kaarlo Jännäri, Director General of the Finnish
Supervision Authority who participated in the whole workshop. Other
colleagues from the FSA, particularly Paula Launiainen and Oili Wuolle
were very helpful in providing advice and material for our work. Heli
Tikkunen at the Bank helped with some of our technical difficulties and
Mia Erkko, Kaisa-Liisa Nordman and Marjut Salovuori with the logistical
support.
David Mayes organized the project, the workshop and edited this book.

DAVID G. MAYES
AARNO LIUKSILA

xii
Notes on the Contributors

The editor(s)
David G. Mayes is Advisor to the Board at the Bank of Finland, Professor
of Economics at London South Bank University, and Honorary Professor
of Banking and Financial Institutions at the University of Stirling.

Aarno Liuksila is Managing Director of the International Arbitration

Management Corporation in Washington, DC.

Thorsten Beck is with World Bank in Washington, DC.

Bethany Blowers is an analyst in the Domestic Finance Division, Bank

of England.

Henk Brouwer is Executive Director of De Nederlandsche Bank.

Peik Granlund is a lawyer in the Finnish Financial Supervision Authority.

Christos Hadjiemmanuil is Senior Lecturer in Law at the London School

of Economics.

Gerbert Hebbink is Senior Economist at the Financial Stability

Department of De Nederlandsche Bank.

Eva H. G. Hüpkes is Head of Regulation in the Legal Department of the

Swiss Federal Banking Commission.

Eigil Mølgaard is a legal and financial adviser, and former Director

General of the Danish Financial Supervisory Authority.

Jón Sigurðsson is President and Chief Executive Officer of the Nordic

Investment Bank.

Gary H. Stern is President of the Federal Reserve Bank of Minneapolis.

Sandra Wesseling is Senior Economist at the Directorate Supervision of

De Nederlandsche Bank.

Garry Young is Senior Research Manager in the Domestic Finance

Division, Bank of England.

xiii
Introduction
Aarno Liuksila

This book stems from the papers contributed to the workshop organized
by the Bank of Finland in November 2002, on the topic, ‘Who Will Pay
for Bank Insolvency?’
The lightning rod for the discussion was an invitation to comment
on a ‘Proposed Bank Reorganisation and Liquidation Scheme’ (the
‘Proposed Scheme’) which had been published in Improving Banking
Supervision, by David Mayes, Liisa Halme and Aarno Liuksila in 2001.
The ‘who’ that will pay for bank insolvency under the Proposed Scheme
are the pre-existing shareholders and unsecured creditors that can
absorb their own losses – in all cases including individual banks of some
size and, in the systemic cases, subject to the adoption of a robust exit
policy that will eliminate delays in the initiation of the process of dis-
tribution of losses, and a requisite legal reform of case administration
that will eliminate delays in the completion of the process. Were
bailouts to occur, nevertheless, the Scheme would eliminate the inci-
dental benefits for the pre-existing shareholders and unsecured credi-
tors. Moreover, the substitution of concessions by the risk-takers for
contributions by taxpayers would re-establish the prudential incentives,
defeating the well-embedded expectations of solvency support from
public resources. The Scheme marshals the resources for meeting the
loss (negative net worth); by logical necessity, the prescribed conces-
sions from the pre-existing shareholders and unsecured creditors suf-
fices to restore the failed bank in a (marginally) solvent condition.
Hence, in its operation the Proposed Scheme is the very opposite of
many flexible case-by-case approaches that categorically deny, ex ante,
any ‘special treatment’ of failed or failing banks, except bailouts that deny
the ‘general treatment’ on a case-by-case basis. It applies in all cases,
including bailouts that might be carried out on a case-by-case basis.

1
D. G. Mayes et al., Who Pays for Bank Insolvency?
© Palgrave Macmillan, a division of Macmillan Publishers Limited 2004
Exploring the Variety of Random
Documents with Different Content
 The Eighty-seventh FIGURE.
The Preparation necessary to the following Figure, and to all other
horizontal Perspectives, whether on flat or vaulted Ceilings.

HE Figure AA represents one of the four Walls of a

Hall, whose true Height IH you would have appear
rais’d to L, by painting a Ballustrade in the Ceiling
thereof. B is the Geometrical Plan of the fourth
part of the said Ceiling; C is the Elevation of half
the Breadth; D is the Section of the Cornice and
Corbels; E is the Elevation of half the Length. In F
is the Point of Sight, in G the Point of Distance; so that the Distance
itself is FG.

Fig. lxxxviii.
 Figura Octogesimaoctava.
Horizontalis projectio balaustiorum figuræ octogesimæseptimæ,
cum brevi distantia.

LARITATIS gratiâ totum laquear divisum est in

quatuor partes. Prima continet contractionem
vestigii & elevationis, quæ perficiuntur methodo
consueta. Nam linea AOV est horizontalis, BC est
linea plani. Punctum oculi est O, distantiæ E.
Secunda pars continet sectionem L, quæ dat
projecturas mutulorum aliarumque partium,
desumendas ex sectione D figuræ octogesimæseptimæ, deformando
eam in angulis B & C. Tertia pars complectitur delineationem
integram sine umbris: ultima pars eandem complectitur cum umbris.
Ob punctum distantiæ parum remotum à puncto oculi, nimiam
amplitudinem ac deformem apparentiam habere videtur hæc
delineatio. Nihilominus, si ex distantia EO figuram suspexeris, omnis
deformitas evanescet.
Ut fucus imperitis fiat, industrii Pictoris interest parare sibi
geminum exemplar suorum Operum, in quibus distantia sit nimis
brevis; unum videlicet palam ostendendum, in quo punctum
distantiæ sit remotum à puncto oculi, quantum necesse est ad
vitandam omnem deformitatem. Alterum verò, in ipsomet Opere
clam usurpandum.
Si pingendæ sint testudines, oportet prius facere in eis
reticulationem peculiarem; quæ quia difficilis est, & paucis explicari
nequit, in aliud Opus reservatur.
 Eighty-eighth Figure.
The horizontal Projection of the Ballustrade of the Eighty-seventh
Figure, view’d at a small Distance.

OR the better Illustration of this Figure, I have

divided the whole Ceiling into Four Parts. The first
contains the Plan and Elevation in Perspective,
after the usual manner; AOV being the horizontal
Line, BC that of the Plan; the Point of Sight O, and
that of Distance E. The second Part contains the
Section L, which gives the Projectures of the
Corbels and other Parts taken from the Section D of the Eighty-
seventh Figure, by drawing it in the Angles B and C. The third Part
comprehends the Delineation of the Perspective without Shadows.
The fourth Part contains the same wholly shadow’d and finish’d.
Through the near Approach of the Point of Distance to the Point of
Sight, you may perhaps imagine this Draught will appear too wide,
and so have an ill Effect: But when once you view it from its due
Distance EO, you will find all such Doubts vanish and come to
nothing.
When you have to deal with Persons unskill’d in these things, and
are to paint for so small a Distance; your best way is to make two
Draughts; one for publick Shew, in which you may place the Point of
Distance so far from the Point of Sight, as is necessary for
preventing Deformity; and the other you may privately make use of
in performing your Work.
If you are to paint arch’d or vaulted Ceilings, a particular kind of
Net or Lattice-work must first be made therein; the Performance
whereof being difficult, and not capable of being explain’d in few
words, I have reserv’d it for another Volume.
Fig. lxxxix.
 Figura Octogesimanona.
Horizontalis projectio architecturæ in laqueari quadrato.

I laquear sit quadratum, & valde distans ab oculo,

architecturam huic similem in eo depingere licebit.
A est elevatio geometrica; eadem verò deformata
in B & C, gerit munus vestigii & elevationis.
Medietas unius ex quatuor partibus, usui esse
potest in toto opere, aut premendo chartam, aut
eâ perforatâ, immittendo per foramina carbonem
minutissimè contusum.
 Eighty-ninth FIGURE.
An horizontal Projection of Architecture in a square Ceiling.

F the Ceiling be square, and very remote from the

Eye, you may paint in it some such Piece of
Architecture as this. A is the geometrical Elevation;
the same reduc’d into Perspective in B and C does
the Office of a Plan and Elevation. The Half of one
of the four Parts may suffice for the Draught of the
whole Work, either by tracing over the Lines of the
Paper, or by pricking small Holes therein, and pouncing them
through with Charcole finely powder’d.

Fig. xc.
 FIGURA Nonagesima.
Horizontalis projectio tholi.

NITIUM hujus rei fiet à vestigio geometrico, in quo

duæ series circulorum designant columnas; aliæ
lineæ designant stylobatas, ac projecturas &
ungues basium & coronicum. Linea plani est AB,
horizontalis CD, perpendicularis AD. Punctum oculi
est O, distantiæ D; adeóque figura hæc debet
habere supra oculum altitudinem DO. Punctum
oculi positum fuit extra ipsum tholum, ut qui eum aspiciunt, minus
defatigentur, ac plus appareat de architectura & de artificio; secus
verò contingeret si punctum oculi esset in medio. Itaque puncta
lineæ EF transferentur in partem AG lineæ AD. Centrum I vestigii
transferetur in H & ex omnibus his punctis fient visuales ad O.
Deinde altitudine tholi, ac divisionibus partium singularum tum
ipsius, tum laternæ, translatis in lineam AB, ex punctis divisionum
fient rectæ ad punctum distantiæ D. Ubi autem hæ secant visualem
AO, erigentur perpendicula, quorum sectiones cum visuali HO
dabunt centra pro singulis circulis. Inter visuales AG ducere oportet
lineas terminativas columnarum & coronicum; quemadmodum fieret,
si ex vestigio eruta fuisset elevatio geometrica. His positis,
aggredieris delineationem opticam ipsius tholi, translatis in
perpendicularem EO centris ope parallelarum HI, LN; ac
semidiametro LM fiet circulus NP pro simâ coronicis: semidiametro
ST fiet circulus QR, & sic de reliquis. Quomodo autem per rectas ex
angulis vestigii ad punctum oculi, habeantur ungues coronicis,
ostendunt numeri 1, 2, 3, 4; lineæ verò laterales unguium tendunt
ad centra suorum circulorum, ut videre est in N 3, 4. In vestigio, ne
nimium occupetur, mutulos omisimus.
 Ex his patet necessitas faciendi vestigium geometricum totius
tholi, ac non sufficere vestigium unius columnæ; quum singulæ
peculiares exigant deformationes. Quum autem Opus ipsum
delineandum ac pingendum fuerit, ipsum desumere non poteris ex
parvo exemplari, ope reticulationis; Quinimo suis locis ducere
oportebit lineas visuales, & invenire centra omnium circulorum.
Figendo autem funiculum in singulis centris, ipsius adjumento
facillimè absolves omnes circumferentias.
 The Ninetieth Figure.
A Cupola in horizontal Perspective.

N the Execution of this Work, you are to begin with

the Geometrical Plan; in which the two Ranges of
Circles denote the Columns, the other Lines shew
the Pedestals, with the Projectures and Breaks of
the Bases and Cornices. The Line of the Plan is AB,
that of the Horizon CD, the perpendicular Line is
AD. The Point of Sight is O, that of Distance D;
wherefore this Figure ought to be plac’d as much above the Eye, as
the Height DO. I have set the Point of Sight something without the
Cupola, that the Eye might be less weary’d in viewing the Work, and
embrace more of the Architecture, than it could have done, had the
Point of Sight been in the midst. The Points of the Line EF are
transferr’d into AG, part of the Line AD. The Center of the Plan I is
continu’d to H, and from all these Points visual Lines are drawn to O.
Then placing the Heights of every part both of the Cupola and
Lantern on the Line AB, from the Points of those Divisions draw
Lines to the Point of Distance D; and where they cut the Visual AO,
erect Perpendiculars intersecting the Line HO; which Points are the
Centers of the several Circles. On the Visuals, between AG, must be
describ’d the Out-lines of the Columns and Cornices, in like manner
as when a Geometrical Upright is rais’d from a Plan. This done, you
proceed to the Delineation of the Cupola itself in Perspective, by
transferring into the Perpendicular EO the several Centers of HO, by
Parallels to HI, as LN, &c. On the Center, with the Interval LM,
describe the Circle NP, for the Nose of the Cornice; and with the
Semidiameter ST describe the Circle QR, and so of the rest. The
Numbers 1, 2, 3, 4, shew how the Breaks of the Cornice are
determin’d by Lines from the Angles of the Geometrical Plan tending
to the Point of Sight, till they intersect the Circle: The Returns of
which Breaks are made by Lines tending to the Centers of their
respective Circles; as is plain from N 3, and N 4. In this Plan I have
omitted the Corbels, lest I should too much encumber the Work.
Hence appears the Necessity of making the Geometrical Plan of
the whole Cupola, the Plan of a single Column not being sufficient;
by reason each requires its particular Delineation. And when the
Work itself is to be drawn for painting, you can’t well take it from a
small Draught by way of Net-work or Squares, but the visual Lines
should be drawn in their proper places, and the several Centers
found; in which, by fixing Strings, you may readily describe the
Circumferences of all the Circles.

Fig. xci.
 Figura Nonagesimaprima.
Tholus figuræ nonagesimæ, cum luminibus & umbris.

HOLUS quem vides in hac paginâ, pollicetur sibi

vitam diuturniorem illo, quem super telario plano
insignis amplitudinis, depinxi anno 1685. in Templo
S. Ignatii Collegii Romani. Proinde si casus aliquis
illum absumat, non deerunt qui ex isto eundem in
melius reficiant. Mirati fuerunt Architecti nonnulli,
quòd columnas anteriores mutulis imposuerim, id
enim in solidis ædificiis ipsi non facerent. Verùm eos metu omni
liberavit amicissimus mihi Pictor, ac pro me spopondit, damnum
omne se statim reparaturum, si fatiscentibus mutulis, columnas in
præceps ruere contingat.
 The Ninety-first Figure.
The Cupola of the Ninetieth Figure, with its Lights and Shades.

HE Cupola in this Plate will in all Likelihood be of

longer Duration, than that which I painted on a
very large Table, for the flat Ceiling of the Church
of S. Ignatius of the Roman College, anno 1685.
For if that suffer by any Accident, with the help of
this its place may be supply’d by a better. Some
Architects dislik’d my setting the advanc’d Columns
upon Corbels, as being a thing not practis’d in solid Structures; but a
certain Painter, a Friend of mine, remov’d all their Scruples, by
answering for me, That if at any time the Corbels should be so much
surcharg’d with the Weight of the Columns, as to endanger their Fall,
he was ready to repair the Damage at his own Cost.

Fig. xcii.
 Figura Nonages. secunda.
Tholus octangularis.

X circulo fiet octagonum, accipiendo medietatem

quadrantis circuli, ut habeantur singula latera
octagoni. In eisdem lateribus distribuetur
vestigium geometricum totius architecturæ, cum
projecturis omnium membrorum, juxta modum
quem servavimus in limbo circulari figuræ
nonagesimæ. Utiliter etiam fieret elevatio
geometrica totius Operis; quamvis ob spatii angustias ego eam
omiserim. Deinde positâ una cuspide circini in centro circuli,
extendetur alia cuspis ad altitudinem singularum projecturarum inter
spatium A & B, ut hic vides: atque ope parallelarum, omnia
transferentur in lineam CD, ut fiat optica deformatio, quam poscit
sectio elevationis, cum aliis præparationibus, ut in figura præcedenti.
Nam hic quoque ope circulorum invenire oportet puncta extrema in
prominentiis membrorum singulorum architecturæ: ut conjungendo
puncta per lineas rectas, quæ forment facies octagoni, compleatur
totum Opus.
 Ninety-second Figure.
An Octangular Cupola.

ROM the Circle describe the Octagon, by taking half

the Quadrant of the former for each Side of the
latter. On these Sides the Geometrical Plan of the
whole Architecture is to be dispos’d, with the
Projectures of all the Members thereof, in the
same manner as was done in the circular Border
of the Ninetieth Figure. It will also be expedient,
to make the Geometrical Elevation of the whole Work, tho’ thro’
Want of Room I have here omitted it. Then placing one Point of the
Compasses in the Center of the Circle, extend the other to the
Height of the several Projectures between A and B, as you see in the
Figure; and by help of the Parallels transfer them all into the Line
CD, for putting the Profile of the Upright into Perspective, and
drawing the other Requisites, as in the foregoing Figure. For here
also, by means of the Circles, are found the extreme Points of the
Projectures of the several Members of the Architecture; and by
conjoining these Points with strait Lines agreeable to the Shape of
the Octagon, the whole Work is completed.
Fig. xciii.
 FIGURA Nonagesimatertia.
Vestigium templi Ludovisiani S. Ignatii almæ urbis.

ONSTITUERAM huic Libro finem imponere figurâ

nonagesimasecunda; nihilominus ut satisfaciam
precibus amicorum, cupientium addiscere modum
reticulationis opticæ, quæ adhibetur in
superficiebus irregularibus, ejusque memini figurâ
octogesima octava, publici juris facere decrevi ejus
construendæ methodum. Ipsiusmet retis ope
delineavi non solùm ædificium mox repræsentandum, sed etiam
figuras omnes testudinis templi Ludovisiani, in qua pingenda nunc
occupor. Eademque reticulatione, quæ erit ultima figura hujus Libri,
dabimus Operi nostro suum complementum; quum nulla sit
superficies, in qua suas delineationes juxta Perspectivæ regulas,
earum rerum Studiosi absolvere nequeant.
Exhibet hæc figura vestigium totius templi. Quamvis enim non
indigeam nisi testudine inter januam maximam & tholum; proderit
nihilominus Architecturæ Studiosis, universi Operis elegantiam ac
symmetriam per otium contemplari.
 The Ninety-third FIGURE.
The Geometrical Plan of the Church of S. Ignatius at Rome.

HAD once determin’d to end this Book with the

Ninety-second Figure; but at the Request of some
Friends, who were desirous to learn the Making of
Perspective Net-work for irregular Surfaces, as was
hinted in the Eighty-eighth Figure; I resolv’d to
publish the Manner of performing the same. By
the Help of this Net-work, I delineated not only
the Architecture now to be treated of; but also each Figure in the
Vault of the Church of S. Ignatius, which I am at present employ’d in
painting. The Method is laid down in the last Figure of this Book, and
entirely completes the same; there being no Superficies, how
irregular soever, but the Studious may thereon describe, by these
Rules, whatever Perspective he has occasion for.
This Figure contains the Plan of the whole Church; for though my
present Design requir’d no more than the Vault of the Nave,
between the great Door and the Cupola; I thought it might be
nevertheless acceptable to the Curious in Architecture, to have a
View of the whole Design, so celebrated for the Elegancy and
Proportion of its Parts.
Fig. xciv.
Figura Nonages. quarta.
Orthographia templi Ludovisiani.

T magis tibi gratificer, orthographiam seu

elevationem templi Ludovisiani in longum dissecti
delineavi, cum omnibus mensuris quæ vestigio
sunt communes; addito tholo juxta ideam Autoris.
Ejus autem nondum constructi loco, positum est in
A & B telarium cum tholo depicto, de quo supra in
figuris nonagesimâ & nonagesimaprimâ.
 Ninety-fourth FIGURE.
The Orthography, or Geometrical Elevation of the Inside of S.
Ignatius’s Church.

OR your greater Satisfaction, I have here given the

Geometrical Upright of the Church dissected
lengthwise, with all its Measures agreeable to
those of the Plan; as also the Cupola design’d by
the Author: Which not being yet built, instead
thereof is plac’d between A and B, the painted
Cupola before describ’d in the Ninetieth and
Ninety-first Figures.

Fig. xcv.
 Figura Nonages. quinta.
Aliæ præparationes ad figuras nonagesimamoctavam &
nonagesimamnonam.

X hac figura in quatuor partes divisa, disces ex uno

intuitu methodum qua sum auspicatus opticam
delineationem templi Ludovisiani. Prima pars
exhibet latus dextrum testudinis inter januam
templi ac tholum. Secunda pars continet vestigium
ejusdem testudinis, arcubus ac lunulis distinctæ.
Tertia pars continet latus dextrum testudinis usque
ad summitatem fenestrarum, unde incipit Architectura quam
pingimus in fornice. Quarta pars est vestigium geometricum fornicis,
cum prominentia quam habent arcus in summitate jam dicta
fenestrarum. Fingimus autem eandem esse soliditatem, tum ædificii
depicti, tum navis templi; solæ enim columnæ, quæ respondent pilis
templi, prominent extra ædificium.
 The Ninety-fifth Figure.
Other Preparations to the Ninety-eighth and Ninety-ninth Figures.

Y this Figure divided into four Parts, you will at first

Sight perceive the Method I observ’d in beginning
the Perspective Design of this Church of S.
Ignatius. The first Part shews the right-hand Side
of the Vault between the Door and the Cupola.
The second contains the Plan of the same Vault,
with its Arches and Lunettes. The third Part
represents the same right-hand Side, to the top of the Windows;
where begins the Architecture painted in the Vault. The fourth Part
contains the Geometrical Plan of that part of the Vault which is
painted; with the Lunettes made by the Arches above the Heads of
the aforesaid Windows. The Disposition of the painted Architecture
above, is the same with that of the Nave of the Church; save that,
answerable to the Pilasters below, I have suppos’d Columns
projecting over the Work.
Fig. xcvi.
 Figura Nonagesimasexta.
Aliæ præparationes ad figuras nonagesimamoctavam &
nonagesimamnonam.

RIMA pars figuræ hujus trifariam divisæ,

repræsentat elevationem geometricam lateris
templi supra coronicem, & ædificii in testudine
pingendi. Secunda pars complectitur arcum
testudinis maximum, & elevationem geometricam
faciei ejusdem ædificii. Tertia pars exhibet
vestigium totius ædificii pingendi in testudine,
cujus amplitudo eadem est cum amplitudine navis, ut antea
dicebamus. Porrò vestigium geometricum non minus necessarium
est ad pingendum ædificium, quàm ad ipsum ex materiâ solidâ
extruendum, ut alibi monuimus.
 The Ninety-sixth Figure.
Other Preparations to the Ninety-eighth and Ninety-ninth Figures.

N this Figure, which consists of three parts, the first

represents the Geometrical Elevation of the Right-
side of the Nave above the Cornice, and of the
Design painted in the Vault. The second contains
the great Arch of the Vault, and the Geometrical
Elevation of the Front of the said Design. The third
part shews the Plan of the whole Work painted on
the Vault, the Extent and Disposition of which is the same with that
of the Nave, as beforemention’d. The Geometrical Plan, as I have
formerly hinted, is no less necessary for the painting a Design in
Perspective, than it is for raising a Structure with solid Materials.

Fig. xcvii.
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