Developing Distress Resolution Procedures for Financial Institution
SUERF Studies, Autumn 2012
55 Pages Posted: 22 May 2012 Last revised: 18 Jul 2012
Date Written: April 15, 2012
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: Suggested Citation