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Resolution of banks: What kind of scenarios to enhance the credibility and the feasibility of resolution strategies

Author

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  • Visnovsky, Frédéric

    (Autorité de Contrôle Prudentiel et de Résolution (ACPR), France)

Abstract

A resolution strategy for banks needs to be feasible and credible. Asking banks to work on their resolvability is a major issue and therefore the resolution strategy developed by the authorities needs addressing the scenarios that are most likely to materialise and lead the institution to resolution. The aspects to be considered are the speed of the scenarios, the liquidity risk to be faced rather a solvency one, the consideration of systemic and idiosyncratic shocks and the perimeter of the resolution group. Based on the experience, there is a need to improve resolution planning and selection of the most adequate resolution strategies. This should cover the range of scenarios considered in resolution planning that has to be broadened in, how to better take into account recovery options in resolution planning and Minimum Requirement for Own Funds and Eligible Liabilities setting, how to consider systemic scenarios in the preliminary public interest assessment and finally what should be the perimeter of the resolution group. While resolution planning has made very good progress as resolution regimes have been established, taking into account those points will be major improvements.

Suggested Citation

  • Visnovsky, Frédéric, 2020. "Resolution of banks: What kind of scenarios to enhance the credibility and the feasibility of resolution strategies," Journal of Financial Compliance, Henry Stewart Publications, vol. 3(4), pages 325-331, June.
    • Handle: RePEc:aza:jfc000:y:2020:v:3:i:4:p:325-331
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    More about this item

    Keywords

    resolution strategy; resolution scenarios; resolution groups; recovery options;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K2 - Law and Economics - - Regulation and Business Law

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