Bank Resolution Regimes and Systemic Risk

68 Pages Posted: 20 May 2020

See all articles by Thorsten Beck

Thorsten Beck

City University London - Sir John Cass Business School; European University Institute; Centre for Economic Policy Research (CEPR)

Deyan Radev

Sofia University, Faculty of Economics and Business Administration

Isabel Schnabel

University of Bonn - Institute for Financial Economics and Statistics; Max Planck Institute for Research on Collective Goods

Multiple version iconThere are 2 versions of this paper

Date Written: May 2020

Abstract

We assess the ability of bank resolution frameworks to deal with systemic banking fragility. Using a novel and detailed database on bank resolution regimes in 22 member countries of the Financial Stability Board, we show that systemic risk, as measured by △CoVaR, increases more for banks in countries with more comprehensive bank resolution frameworks after negative system-wide shocks, such as Lehman Brothers' default, while it decreases more after positive system-wide shocks, such as Mario Draghi's "whatever it takes'' speech. These results suggest that more comprehensive bank resolution may exacerbate the effect of system-wide shocks and should not be solely relied on in cases of systemic distress.

Keywords: bail-in, Bank resolution regimes, systemic risk

JEL Classification: G01, G21, G28

Suggested Citation

Beck, Thorsten and Radev, Deyan and Schnabel, Isabel, Bank Resolution Regimes and Systemic Risk (May 2020). Available at SSRN: https://ssrn.com/abstract=3603954

Thorsten Beck (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

European University Institute

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Deyan Radev

Sofia University, Faculty of Economics and Business Administration ( email )

15, Tzar Osvoboditel Blvd.
Sofia, 1504
Bulgaria

Isabel Schnabel

University of Bonn - Institute for Financial Economics and Statistics ( email )

Adenauerallee 24-42
Bonn, 53113
Germany

HOME PAGE: http://www.finance.uni-bonn.de/schnabel

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany
+49-228-9141665 (Phone)
+49-228-9141621 (Fax)

HOME PAGE: http://www.coll.mpg.de/team/page/isabel_schnabel

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
688
PlumX Metrics