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Bank Resolution Plans as a catalyst for global financial reform

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  • Avgouleas, Emilios
  • Goodhart, Charles
  • Schoenmaker, Dirk

Abstract

Bank Resolution Plans (Living Wills) should help with the resolution of systemically important financial institutions (SIFIs) in distress. They should be used to clarify and simplify the legal structure and make it commensurate with the functional business lines of the institution. Living Wills could also prove the right regulatory instrument to achieve two further innovations in the resolution of SIFIs with cross-border presence. First, they could incorporate burden sharing arrangements between countries enabling burden sharing on an institution by institution basis. However, there would remain problems arising from the incompatibility of the laws governing cross-border bank insolvencies. Many countries are currently introducing special laws covering the resolution of SIFIs. This creates a window of opportunity to use Living Wills to introduce a second innovation: a consistent legal regime for the resolution of SIFIs across the G20 countries.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Stability.

Volume (Year): 9 (2013)
Issue (Month): 2 ()
Pages: 210-218

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Handle: RePEc:eee:finsta:v:9:y:2013:i:2:p:210-218

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Web page: http://www.elsevier.com/locate/jfstabil

Related research

Keywords: Bank resolution; Living wills; SIFIs; Burden sharing; Cross-border insolvency;

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References

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  1. Charles Goodhart & Dirk Schoenmaker, 2009. "Fiscal Burden Sharing in Cross-Border Banking Crises," International Journal of Central Banking, International Journal of Central Banking, vol. 5(1), pages 141-165, March.
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  3. Louis W. Pauly, 2009. "The Old and the New Politics of International Financial Stability," Journal of Common Market Studies, Wiley Blackwell, vol. 47, pages 955-975, November.
  4. Krimminger, Michael H., 2008. "The resolution of cross-border banks: Issues for deposit insurers and proposals for cooperation," Journal of Financial Stability, Elsevier, vol. 4(4), pages 376-390, December.
  5. Kashyap, Anil K. & Rajan, Raghuram G. & Stein, Jeremy C., 2008. "Rethinking capital regulation," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 431-471.
  6. Eisenbeis, Robert A. & Kaufman, George G., 2008. "Cross-border banking and financial stability in the EU," Journal of Financial Stability, Elsevier, vol. 4(3), pages 168-204, September.
  7. Andrei Shleifer & Robert W. Vishny, 2010. "Asset Fire Sales and Credit Easing," American Economic Review, American Economic Association, vol. 100(2), pages 46-50, May.
  8. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  9. Avgouleas, Emilios & Goodhart, Charles & Schoenmaker, Dirk, 2010. "Living Wills as a Catalyst for Action," Working Papers 10-09, University of Pennsylvania, Wharton School, Weiss Center.
  10. Jones, David S. & King, Kathleen Kuester, 1995. "The implementation of prompt corrective action: An assessment," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 491-510, June.
  11. Flannery, Mark J., 2009. "Financial system instability: Threats, prevention, management, and resolution," Journal of Financial Stability, Elsevier, vol. 5(3), pages 221-223, September.
  12. Acharya, Viral V., 2009. "A Theory of Systemic Risk and Design of Prudential Bank Regulation," CEPR Discussion Papers 7164, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Frank A.G. den Butter & Mathieu L.L. Segers, 2014. "Prospects for an EMU between Federalism and Nationalism," Tinbergen Institute Discussion Papers 14-008/VI, Tinbergen Institute.
  2. Teunis Brosens & Wilfred Nagel, 2014. "The Good, the Bad and the Big: Is there still A Place for Big Banks?," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  3. Ata Can Bertay & Asli Demirguc-Kunt & Harry Huizinga, 2014. "Size and Stability of Big Banks," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  4. Aerdt Houben, 2014. "Have We Solved the Too-big-to-fail Problem?," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  5. Harald Benink & Ata Can Bertay & Michiel Bijlsma & Teunis Brosens & Andreas Bley & Allard Bruinshoofd & Jakob de Haan & Asli Demirguc-Kunt & Lex Hoogduin & Aerdt Houben & Harry Huizinga & Wilfred Nage, 2014. "The Value of Banks and Their Business Models to Society," SUERF Studies, SUERF - The European Money and Finance Forum, number 2014/2 edited by Allard Bruinshoofd & Jakob de Haan.
  6. Cerutti, Eugenio & Schmieder, Christian, 2014. "Ring fencing and consolidated banks’ stress tests," Journal of Financial Stability, Elsevier, vol. 11(C), pages 1-12.
  7. Dirk Schoenmaker & Harald Benink & Andreas Bley & Alicia Sanchis & Michiel Bijlsma, 2014. "What Have We Learnt about Banks and their Business Models?," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  8. Lex Hoogduin, 2014. "The Value of Banks after the Great Financial Expansion," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  9. Allard Bruinshoofd & Jakob de Haan, 2014. "Introduction," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.

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