Journal Articles
Bank resolution: a framework for the assessment of regulatory intervention
Authors
Dewatripont, Mathias; Freixas, Xavier
UPF authors
Type
Scholarly articles
Journal title
Oxford Review of Economic Policy
Publication year
2011
Volume
27
Number
3
Pages
411-436
ISSN
0266-903X
Publication State
Published
Abstract
More than ever, the current crisis has highlighted the cost of banking crises in budgetary and economic growth terms. Whether or not to restructure a bank is a key determinant of who bears the costs. The present article surveys the main issues concerning banks¿ restructuring, by considering the bargaining game that is played between regulators and shareholders when a bank is in distress. This revolves around the framework of negotiation that was established by the regulator, the fall-back position which is determined by bankruptcy legislation, and the objective function of the regulator. In this context, we argue that it is possible to improve upon existing restructuring mechanisms by making banks¿ bail-outs less costly to taxpayers and improving the ex ante incentives of banks¿ managers and shareholders.
Complete citation
Dewatripont, Mathias; Freixas, Xavier. Bank resolution: a framework for the assessment of regulatory intervention. Oxford Review of Economic Policy 2011; 27(3): 411-436.
