The Central Role of Resolution Policy in Dealing with Systemically Important Financial Institution

Richard J. Herring
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Richard J. Herring: University of PA

Working Papers from University of Pennsylvania, Wharton School, Weiss Center

Abstract: This paper reviews the many challenges that must be faced in designing and implementing an effective resolution policy for Systemically Important Financial Institutions (SIFIs). It notes the criteria that a good resolution policy should achieve and measures each of the commonly deployed resolution tools against these standards. In addition, agency-driven procedures are compared to judicial procedures. Although many proposals exist to make bankruptcy proceedings a viable alternative to agency-driven procedures, we still lack a framework for harmonizing judicial proceedings across borders. Problems that have surfaced in the resolution of cross-border insolvencies over the past thirty-five years are highlighted with special attention to problems that surfaced in the recent crisis. The paper concludes by examining some of the most important obstacles to achieving a harmonized approach to resolving an insolvent, international SIFI.

Date: 2011-05
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:upafin:11-71

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