Global Shock, Risks, and Asian Financial Reform
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Global Shock, Risks, and Asian Financial Reform

Edited by Iwan J. Azis and Hyun S. Shin

The growth of financial markets has clearly outpaced the development of financial market regulations. With growing complexity in the world of finance and the resultant higher frequency of financial crises, all eyes have shifted toward the current inadequacy of financial regulation. This book expertly examines what this episode means for Asia’s financial sector and its stability, and what the implications will be for the region’s financial regulation. By focusing on legal and institutional frameworks the book also elaborates on various issues and challenges in terms of how financial liberalization can maximize the benefits and minimize the risks of crisis.
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Chapter 12: Effective resolution regimes for financial institutions in ASEAN+3

A. Michael Andrews


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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