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Bank Resolution Plans as a catalyst for global financial reform

Author

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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.

Suggested Citation

  • Avgouleas, Emilios & Goodhart, Charles & Schoenmaker, Dirk, 2013. "Bank Resolution Plans as a catalyst for global financial reform," Journal of Financial Stability, Elsevier, vol. 9(2), pages 210-218.
  • Handle: RePEc:eee:finsta:v:9:y:2013:i:2:p:210-218
    DOI: 10.1016/j.jfs.2011.12.002
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. repec:erf:erfstu:79 is not listed on IDEAS
    3. Jarque, Arantxa & Price, David A., 2015. "Living Wills: A Tool for Curbing Too Big to Fail," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 77-94.
    4. Allard Bruinshoofd & Jakob de Haan, 2014. "Introduction," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    5. Alexander Schäfer & Isabel Schnabel & Beatrice Weder di Mauro, 2016. "Bail-in expectations for European banks: Actions speak louder than words," ESRB Working Paper Series 07, European Systemic Risk Board.
    6. Sylwester Kozak, 2016. "Concentration of credit exposure as a significant source of risk in banking activities: the idea and methods of estimation," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 11(3), pages 103-115, February.
    7. 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.
    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. Nedelchev, Miroslav, 2015. "Coordination of banking regulation in the EU," MPRA Paper 66073, University Library of Munich, Germany, revised 2015.
    10. Emilios Avgouleas, 2013. "Effective Governance of Global Financial Markets: an Evolutionary Plan for Reform," Global Policy, London School of Economics and Political Science, vol. 4, pages 74-84, July.
    11. Ata Can Bertay & Asli Demirgüç-Kunt & Harry Huizinga & phu113, 2014. "Size and Stability of Big Banks," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    12. Cerutti, Eugenio & Schmieder, Christian, 2014. "Ring fencing and consolidated banks’ stress tests," Journal of Financial Stability, Elsevier, vol. 11(C), pages 1-12.
    13. Vollmer, Uwe & Wiese, Harald, 2013. "Minimum capital requirements, bank supervision and special resolution schemes. Consequences for bank risk-taking," Journal of Financial Stability, Elsevier, vol. 9(4), pages 487-497.
    14. Aerdt Houben, 2014. "Have We Solved the Too-big-to-fail Problem?," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    15. Rolf H. Weber & Douglas W. Arner & Evan C. Gibson & Simone Baumann, 2014. "Addressing systemic risk in East Asia: financial regulatory design," Chapters,in: Global Shock, Risks, and Asian Financial Reform, chapter 6, pages 204-245 Edward Elgar Publishing.
    16. 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.
    17. Vollmer Uwe, 2016. "The Asymmetric Implementation of the European Banking Union (EBU): Consequences for Financial Stability," International Journal of Management and Economics, De Gruyter Open, vol. 50(1), pages 7-26, June.

    More about this item

    Keywords

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

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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