Bank Resolution Regimes and Systemic Risk

Thorsten Beck, Deyan Radev and Isabel Schnabel

No 14724, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 â–³CoVaR, 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: Bank resolution regimes; Bail-in; Systemic risk (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fmk and nep-rmg
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Citations: View citations in EconPapers (14)

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