Developing Distress Resolution Procedures for Financial Institution

SUERF Studies, Autumn 2012

55 Pages Posted: 22 May 2012 Last revised: 18 Jul 2012

See all articles by Clas Wihlborg

Clas Wihlborg

Chapman University; University West

Date Written: April 15, 2012

Abstract

This paper focuses on the need for a lex specialis for resolution of insolvent banks and other financial institutions serving similar functions, and on requirements for making resolution procedures effective. After a review of the objectives of general insolvency law and the special characteristics of banks and the financial system, approaches to resolution procedures in a few “model countries” are described. The issues that require attention in legislation for resolution procedures are identified as the contagion issue, the valuation issue, the predictability issue, the information issue, the coverage issue, the funding issue and the cross-border issue. Complementary reforms of the financial architecture that would enhance the effectiveness of legislation for resolution procedures are discussed as well.

Keywords: Bank insolvency, crisis resolution, contagion

JEL Classification: G01, G18, G28

Suggested Citation

Wihlborg, Clas, Developing Distress Resolution Procedures for Financial Institution (April 15, 2012). SUERF Studies, Autumn 2012, Available at SSRN: https://ssrn.com/abstract=2063995

Clas Wihlborg (Contact Author)

Chapman University ( email )

333 N. Glassell
Orange, CA 92866
United States
+17147447630 (Phone)

University West ( email )

Trollhättan, 46186
Sweden

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