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Research Handbook on Crisis Management in the Banking Sector

Research Handbook on Crisis Management in the Banking Sector

Research Handbooks in Financial Law series

Edited by Matthias Haentjens and Bob Wessels

In this timely Handbook, over 30 prominent academics, practitioners and regulators from across the globe provide in-depth insights into an area of law that the recent global financial crisis has placed in the spotlight: bank insolvency law.

Chapter 4: Large scale bank insolvencies and the challenges ahead

Andrew Campbell and Paula Moffatt

Subjects: economics and finance, financial economics and regulation, money and banking, law - academic, company and insolvency law, finance and banking law


The recent global financial crisis was very damaging to the global economy and adversely affected all countries to some extent with many banks in a number of countries experiencing financial distress. Within the European Union (‘EU’), between October 2008 and the end of December 2012, €591.9 billion (4.6 per cent of EU GDP for 2012) was given in public support for banks. Prior to the onset of the crisis, bank insolvency had not really been on the agenda in many countries in Europe or elsewhere, although since the 1930s it has continually been an issue in the United States (‘US’). As will be seen later in this Chapter many of the recent developments in relation to bank insolvency law have been significantly influenced by the US approach. Bank insolvency has been on the agenda of the International Monetary Fund (‘IMF’) since the 1980s and, as part of the conditionality requirements for receiving financial assistance, countries have often been required to introduce law reforms. In many cases, this required the banking laws to be amended and modernised and this typically included bank insolvency procedures which would provide for alternatives, in appropriate situations, to the liquidation of a financially distressed bank.4 The World Bank has also done significant work on this area and, together with the IMF, published a joint report on bank insolvency in 2009 (the ‘IMF/World Bank Report’).

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