Chapter 12: Effective resolution regimes for financial institutions in ASEAN+3
The high costs of rescuing banks and other financial institutions during the 2007–09 financial turmoil led to a post-crisis focus on the importance of effective resolution regimes to provide credible alternatives to bail-outs. Experience in the crisis revealed that many European countries lacked a legal regime capable of seizing control of a failing bank and imposing a resolution while at the same time preserving essential functions to minimize disruption to the financial sector and real economy. Experience in the crisis also highlighted the need for a regime to deal in the same way with systemically important non-bank institutions. The post-crisis focus on resolution frameworks is evident in several strands of the efforts to enhance the international financial architecture and standards, although not yet formally endorsed as an international standard, the ‘Key attributes of effective resolution regimes for financial institutions’ (hereafter Key Attributes) have emerged as de facto best practices. Considerable international attention has been directed at improving the regimes for G-SIFIs and cross-border resolution, but the essential requirement for effective cross-border resolution, and the avenue offering the greatest scope for practical progress, is strengthening national resolution regimes.
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