Dynamic Resolution of Large Financial Institutions

27 Pages Posted: 12 Apr 2013

See all articles by Thomas H. Jackson

Thomas H. Jackson

University of Rochester

David A. Skeel

University of Pennsylvania Law School; European Corporate Governance Institute (ECGI)

Date Written: 2012


One of the more important issues emerging out of the 2008 financial crisis concerns the proper resolution of a systemically important financial institution. In response to this, Title II of Dodd-Frank created the Orderly Liquidation Authority, or OLA, which is designed to create a resolution framework for systemically important financial institutions that is based on the resolution authority that the FDIC has held over commercial bank failures. In this article, we consider the various alternatives for resolving systemically important institutions. Among these alternatives, we discuss OLA, a European-style bail-in process, and coerced mergers, while also extensively focusing on the bankruptcy code. We argue that implementing several discrete modifications to Dodd-Frank, as well adopting an ambitious Chapter 14 proposal written by a working group at the Hoover Institution is the best way forward for establishing a strong resolution framework.

Keywords: Finance, large financial institutions, liquidation, reorganization, administrative resolution, Federal Deposit Insurance Corporation, regulator-brokered sales, bankruptcy judges, reform

JEL Classification: G2, G21, G28

Suggested Citation

Jackson, Thomas H. and Skeel, David A., Dynamic Resolution of Large Financial Institutions (2012). 2 Harvard Business Law Review 435 ; U of Penn, Inst for Law & Econ Research Paper No. 13-13. Available at SSRN: https://ssrn.com/abstract=2247599

Thomas H. Jackson

University of Rochester ( email )

300 Crittenden Blvd.
Rochester, NY 14627
United States

David A. Skeel (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-573-9859 (Phone)
215-573-2025 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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