A macro approach to international bank resolution

Arbeitspapier

In the aftermath of the Great Financial Crisis, regulators have rushed to strengthen banking supervision and implement bank resolution regimes. While such resolution regimes are welcome to reintroduce market discipline and reduce the reliance on taxpayer-funded bailouts, the effects on the wider banking system have not been properly considered. This paper proposes a macro approach to resolution, which should consider (i) the contagion effects of bail-in, and (ii) the continuing need for a fiscal backstop to the financial system. For bail-in to work, it is important that bail-inable bank bonds are largely held outside the banking sector, which is currently not the case. Stricter capital requirements could push them out of the banking system. The organisation of the fiscal backstop is crucial for the stability of the global banking system. Single-point-of-entry resolution of international banks is only possible for the very largest countries or for countries working together, including in terms of sharing the burden of a potential bank bailout. The euro area has adopted the latter approach in its Banking Union. Other countries have taken a stand-alone approach, which leads to multiple-point-of-entry resolution of international banks and contributes to fragmentation of the global banking system.

Object Details

• ISBN: 978-92-95210-43-1
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ESRB Working Paper Series ; No. 56

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Subject: bank resolution ; international banking ; single point of entry ; multiple point of trilemma ; banking union

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schoenmaker, Dirk
• Event: Veröffentlichung
• (who): European Systemic Risk Board (ESRB), European System of Financial Supervision
• (where): Frankfurt a. M.
• (when): 2017

Further information

• DOI: doi:10.2849/88978
• Handle: http://hdl.handle.net/10419/193563
• Last update: 10.03.2025, 11:41 AM CET