Living Wills for Systemically Important Financial Institutions: Some Expected Benefits and Challenges
Arantxa Jarque and
David A. Price
Richmond Fed Economic Brief, 2015, issue Aug
The Dodd-Frank Act requires systemically important financial institutions to create resolution plans, or living wills, that bankruptcy courts can follow if these institutions fall into severe financial distress. The plans must set out a path for resolution without public bailouts and with minimal disruption to the financial system. While living wills can, in this way, help to curb the "too big to fail" problem, regulators face a number of challenges in achieving this goal. The authority granted to regulators by the Act, including the power to make systemically important institutions change their structures, offers promising means of addressing these challenges.
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