Bank Resolution and Creditor Distribution: The Tension Shaping Global Banking – Part II: The Cross-Border Dimension
Posted: 3 Jan 2019
Date Written: December 18, 2018
New bank resolution frameworks that aim to address the complex task of managing the collapse of a large financial institution stand on a considerable tension with basic principles and policy objectives of insolvency law. In this two-part study, we present an analytical framework that aims at helping us understand how this tension can undermine the effectiveness of the new bank resolution frameworks. In the first part of this study, we introduced our three-layered framework and explored its first two layers: the group dimension, and the duality of crisis-prevention and crisis-management tools. In this second part, we explore the last layer: the cross-border dimension. As in Part I, we reflect on the practical challenges that resolution authorities are likely to face when implementing the new resolution frameworks. In addition, we use the insights from our analysis to reflect on the impact that these new bank resolution frameworks will have on the governance of international financial markets and conclude that these frameworks will fundamentally change how large banks do business at the global level.
Keywords: bank resolution, insolvency law, creditor distribution, bail-in, MREL, TLAC, bank groups
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