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The treatment of distressed banks

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  • Dewatripont, M.
  • Rochet, JC.

Abstract

This article suggests some reforms of regulatory architecture for the treatment of distressed banks. Our main recommendations are: • a special bankruptcy regime for banks should be implemented ; • strong, truly independent supervisory agencies should be established ; • the incentives of the top managers of distressed banks should not be kept unchecked ; • procyclicality of solvency regulations should be dampened by the introduction of “automatic stabilisers” ; • one should move toward centralised supervision in economic areas which are meant to be integrated.

Suggested Citation

  • Dewatripont, M. & Rochet, JC., 2009. "The treatment of distressed banks," Financial Stability Review, Banque de France, issue 13, pages 65-74, September.
  • Handle: RePEc:bfr:fisrev:2009:13:7
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    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/financial-stability-review-13_2009-09.pdf
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    Cited by:

    1. Korte, Josef, 2015. "Catharsis—The real effects of bank insolvency and resolution," Journal of Financial Stability, Elsevier, vol. 16(C), pages 213-231.
    2. Michel Aglietta & Laurence Scialom, 2010. "A Systemic Approach to Financial Regulation: a European Perspective," International Economics, CEPII research center, issue 123, pages 31-65.
    3. Korte, Josef, 2013. "Catharsis - The real effects of bank insolvency and resolution," Discussion Papers 21/2013, Deutsche Bundesbank.
    4. Matej Marinc & Razvan Vlahu, 2011. "The Economic Perspective of Bank Bankruptcy Law," DNB Working Papers 310, Netherlands Central Bank, Research Department.
    5. Mälkönen, Ville & Niinimäki, J.-P., 2012. "Blanket guarantee, deposit insurance and restructuring decisions for multinational banks," Journal of Financial Stability, Elsevier, vol. 8(2), pages 84-95.

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