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The Central Role of Resolution Policy in Dealing with Systemically Important Financial Institution

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  • Herring, Richard J.

    (University of PA)

Abstract

This paper reviews the many challenges that must be faced in designing and implementing an effective resolution policy for Systemically Important Financial Institutions (SIFIs). It notes the criteria that a good resolution policy should achieve and measures each of the commonly deployed resolution tools against these standards. In addition, agency-driven procedures are compared to judicial procedures. Although many proposals exist to make bankruptcy proceedings a viable alternative to agency-driven procedures, we still lack a framework for harmonizing judicial proceedings across borders. Problems that have surfaced in the resolution of cross-border insolvencies over the past thirty-five years are highlighted with special attention to problems that surfaced in the recent crisis. The paper concludes by examining some of the most important obstacles to achieving a harmonized approach to resolving an insolvent, international SIFI.

Suggested Citation

  • Herring, Richard J., 2011. "The Central Role of Resolution Policy in Dealing with Systemically Important Financial Institution," Working Papers 11-71, University of Pennsylvania, Wharton School, Weiss Center.
    • Handle: RePEc:ecl:upafin:11-71
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    File URL: http://fic.wharton.upenn.edu/fic/papers/11/11-71.pdf
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    Cited by:

    1. Davies, Geoffrey & Dobler, Marc, 2011. "Bank resolution and safeguarding the creditors left behind," Bank of England Quarterly Bulletin, Bank of England, vol. 51(3), pages 213-223.
    2. Mariana Laverde & Javier Gutiérrez Rueda, 2012. "¿Cómo caracterizar entidades sistémicas?: Medidas de impacto sistémico para el sistema financiero colombiano," Temas de Estabilidad Financiera 065, Banco de la Republica de Colombia.

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