We are grateful for guidance provided by Olivier Blanchard and José Viñals, inputs from Luis Cort... more We are grateful for guidance provided by Olivier Blanchard and José Viñals, inputs from Luis Cortavarria and very useful comments from internal and external reviewers, including during an informal discussion at the IMF Executive Board. DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessari... more DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
This technical note and manual (TNM) addresses the following issues: advantages and disadvantages... more This technical note and manual (TNM) addresses the following issues: advantages and disadvantages of different types of depositor preference, international best practice and experience in adopting depositor preference, and introducing depositor preference in jurisdictions with or without deposit insurance.
A key element of the international reform agenda since the Global Financial Crisis has been to st... more A key element of the international reform agenda since the Global Financial Crisis has been to strengthen resolution regimes and make government bailouts the last, not first, resort. A new international standard prescribes a range of tools, powers, and funding arrangements needed to resolve “any financial institution that could be systemically significant or critical if it fails.” It recommends having resolution funding arrangements set up in advance, “so that authorities are not constrained to rely on public ownership or bail-out funds as a means of resolving firms.” It leaves open significant flexibility with respect to the arrangements that would provide the resources authorities will need to carry out effective resolution. This paper offers a framework for weighing the relative advantages of different resolution funding options that could meet the standard. It presents the main developments to date and discusses the advantages and disadvantages of different options.
Financial crises are a recurring feature of modern economies. This article summarizes the lessons... more Financial crises are a recurring feature of modern economies. This article summarizes the lessons learned from policy interventions and tools used to resolve banking crises from a practical, operational perspective and in light of the experiences and challenges faced during and since the 2008 global financial crisis. Managing a systemic banking crisis is a complex, multiyear process and requires a comprehensive framework for addressing systemic banking problems while minimizing taxpayers’ costs. Expected final online publication date for the Annual Review of Financial Economics, Volume 13 is March 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.
DISCLAIMER: Staff Discussion Notes (SDNs) showcase policy-related analysis and research being dev... more DISCLAIMER: Staff Discussion Notes (SDNs) showcase policy-related analysis and research being developed by IMF staff members and are published to elicit comments and to encourage debate. The views expressed in Staff Discussion Notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessari... more DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
IMF Working Papers describe research in progress by the author(s) and are published to elicit com... more IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Research and analysis Bank resolution: safeguarding the creditors left behind 213 This article is... more Research and analysis Bank resolution: safeguarding the creditors left behind 213 This article is in two parts. The first provides a general overview of the principal objectives and features of a bank resolution regime, drawing in particular on the design of the United Kingdom's Special Resolution Regime (SRR). The second part of the article considers the measures adopted in the design of the SRR to provide appropriate protection to uninsured creditors and counterparties of a failed bank. These creditors could typically include bondholders and wholesale depositors as well as market counterparties owed sums by the bank under derivatives and other financial contracts. These protective measures-referred to as 'creditor safeguards'can be broadly divided into two categories: ex-ante restrictions on the ways in which resolution tools can be deployed and ex-post rights to compensation. This second part aims to show why these safeguards are necessary and how their design requires a careful balance between providing an appropriate degree of market certainty on the one hand and retaining sufficient flexibility to effect an orderly resolution on the other. Finally, it offers some examples from the resolution of the Dunfermline Building Society to show why getting the balance of creditor safeguards right is so important to effective resolution.
This paper compares the policy choices in recent and past crises, explains why those choices vari... more This paper compares the policy choices in recent and past crises, explains why those choices varied, and assesses the current state of financial and operational restructuring and institutional reform. While acknowledging the unique and global nature of the recent crisis and varying country circumstances, analysis suggests that the diagnosis and repair of financial institutions and overall asset restructuring are much less advanced than they should be at this stage and that moral hazard has increased. Consequently, vulnerabilities in the global financial system remain considerable and continue to threaten the sustainability of the recovery. These conclusions point to a number of steps to finish the business of financial sector repair and reform.
DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessari... more DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate. JEL Classification Numbers: Keywords: Author’s E-mail Address:
This paper compares the policy choices in recent and past crises, explains why those choices vari... more This paper compares the policy choices in recent and past crises, explains why those choices varied, and assesses the current state of financial and operational restructuring and institutional reform. While acknowledging the unique and global nature of the recent crisis and varying country circumstances, analysis suggests that the diagnosis and repair of financial institutions and overall asset restructuring are much less advanced than they should be at this stage and that moral hazard has increased. Consequently, vulnerabilities in the global financial system remain considerable and continue to threaten the sustainability of the recovery. These conclusions point to a number of steps to finish the business of financial sector repair and reform.
We are grateful for the guidance provided by José Viñals and Jonathan Fiechter, and for the very ... more We are grateful for the guidance provided by José Viñals and Jonathan Fiechter, and for the very useful input and comments from numerous internal and external reviewers, including during an informal discussion at the IMF Executive Board. The views expressed in this paper are those of the authors. Ivan Guerra and Sofiya Avramova provided excellent research assistance. DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
We are grateful for guidance provided by Olivier Blanchard and José Viñals, inputs from Luis Cort... more We are grateful for guidance provided by Olivier Blanchard and José Viñals, inputs from Luis Cortavarria and very useful comments from internal and external reviewers, including during an informal discussion at the IMF Executive Board. DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessari... more DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
This technical note and manual (TNM) addresses the following issues: advantages and disadvantages... more This technical note and manual (TNM) addresses the following issues: advantages and disadvantages of different types of depositor preference, international best practice and experience in adopting depositor preference, and introducing depositor preference in jurisdictions with or without deposit insurance.
A key element of the international reform agenda since the Global Financial Crisis has been to st... more A key element of the international reform agenda since the Global Financial Crisis has been to strengthen resolution regimes and make government bailouts the last, not first, resort. A new international standard prescribes a range of tools, powers, and funding arrangements needed to resolve “any financial institution that could be systemically significant or critical if it fails.” It recommends having resolution funding arrangements set up in advance, “so that authorities are not constrained to rely on public ownership or bail-out funds as a means of resolving firms.” It leaves open significant flexibility with respect to the arrangements that would provide the resources authorities will need to carry out effective resolution. This paper offers a framework for weighing the relative advantages of different resolution funding options that could meet the standard. It presents the main developments to date and discusses the advantages and disadvantages of different options.
Financial crises are a recurring feature of modern economies. This article summarizes the lessons... more Financial crises are a recurring feature of modern economies. This article summarizes the lessons learned from policy interventions and tools used to resolve banking crises from a practical, operational perspective and in light of the experiences and challenges faced during and since the 2008 global financial crisis. Managing a systemic banking crisis is a complex, multiyear process and requires a comprehensive framework for addressing systemic banking problems while minimizing taxpayers’ costs. Expected final online publication date for the Annual Review of Financial Economics, Volume 13 is March 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.
DISCLAIMER: Staff Discussion Notes (SDNs) showcase policy-related analysis and research being dev... more DISCLAIMER: Staff Discussion Notes (SDNs) showcase policy-related analysis and research being developed by IMF staff members and are published to elicit comments and to encourage debate. The views expressed in Staff Discussion Notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessari... more DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
IMF Working Papers describe research in progress by the author(s) and are published to elicit com... more IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Research and analysis Bank resolution: safeguarding the creditors left behind 213 This article is... more Research and analysis Bank resolution: safeguarding the creditors left behind 213 This article is in two parts. The first provides a general overview of the principal objectives and features of a bank resolution regime, drawing in particular on the design of the United Kingdom's Special Resolution Regime (SRR). The second part of the article considers the measures adopted in the design of the SRR to provide appropriate protection to uninsured creditors and counterparties of a failed bank. These creditors could typically include bondholders and wholesale depositors as well as market counterparties owed sums by the bank under derivatives and other financial contracts. These protective measures-referred to as 'creditor safeguards'can be broadly divided into two categories: ex-ante restrictions on the ways in which resolution tools can be deployed and ex-post rights to compensation. This second part aims to show why these safeguards are necessary and how their design requires a careful balance between providing an appropriate degree of market certainty on the one hand and retaining sufficient flexibility to effect an orderly resolution on the other. Finally, it offers some examples from the resolution of the Dunfermline Building Society to show why getting the balance of creditor safeguards right is so important to effective resolution.
This paper compares the policy choices in recent and past crises, explains why those choices vari... more This paper compares the policy choices in recent and past crises, explains why those choices varied, and assesses the current state of financial and operational restructuring and institutional reform. While acknowledging the unique and global nature of the recent crisis and varying country circumstances, analysis suggests that the diagnosis and repair of financial institutions and overall asset restructuring are much less advanced than they should be at this stage and that moral hazard has increased. Consequently, vulnerabilities in the global financial system remain considerable and continue to threaten the sustainability of the recovery. These conclusions point to a number of steps to finish the business of financial sector repair and reform.
DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessari... more DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate. JEL Classification Numbers: Keywords: Author’s E-mail Address:
This paper compares the policy choices in recent and past crises, explains why those choices vari... more This paper compares the policy choices in recent and past crises, explains why those choices varied, and assesses the current state of financial and operational restructuring and institutional reform. While acknowledging the unique and global nature of the recent crisis and varying country circumstances, analysis suggests that the diagnosis and repair of financial institutions and overall asset restructuring are much less advanced than they should be at this stage and that moral hazard has increased. Consequently, vulnerabilities in the global financial system remain considerable and continue to threaten the sustainability of the recovery. These conclusions point to a number of steps to finish the business of financial sector repair and reform.
We are grateful for the guidance provided by José Viñals and Jonathan Fiechter, and for the very ... more We are grateful for the guidance provided by José Viñals and Jonathan Fiechter, and for the very useful input and comments from numerous internal and external reviewers, including during an informal discussion at the IMF Executive Board. The views expressed in this paper are those of the authors. Ivan Guerra and Sofiya Avramova provided excellent research assistance. DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
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