Research Handbook on Crisis Management in the Banking Sector
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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.
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Chapter 11: Resolution of cross-border groups

Paul Davies

Extract

Banks that are systemically important from a global perspective are, almost by definition and certainly in fact, comprised legally of a group of companies, the members of which operate in a large number of separate legal jurisdictions. The same is broadly true of banks which are systemically important on a regional basis. Even large national banks are likely to have some subsidiaries which operate in jurisdictions other than the one in which the parent company is incorporated. It follows that mechanisms for the resolution of banks which pose the greatest risks to financial stability inevitably raise the question of how bank resolution operates in a cross-border context, that is, in circumstances where resolution authorities in more than one country are likely to have an interest in the overall resolution process and are endowed with jurisdiction over at least parts of that process. These problems do not go away – they become more complex in some ways – if the bank operates in some countries through branches rather than through subsidiaries with their own separate legal personality. The existence of assets and liabilities in a country will give that country’s resolution authorities a natural interest in whether those assets will be used to meet in-country liabilities and, in general, how those liabilities are to be met. The number of global systemically important banks is small. The Financial Stability Board identified just 29 such banks in 2013.

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