Introduction

Chapter

Abstract

The 2007–2009 financial crisis has shown that bank failures are a common threat in both developed and emerging economies. Hundreds of lenders have failed since the onset of the crisis. One lesson from the recent financial turmoil is the need for more effective systemic regulation. In addition to improvements in the current prudential and regulatory measures that should allow regulators to identify risks at an early stage and prevent them from threatening the entire financial system, there is an increased demand at the national and international level for a specific bank bankruptcy law. This special regime for dealing with troubled banks should create appropriate tools for prompt intervention in the case of bank distress that would allow for efficient reorganization and closure of these institutions in order to limit their impact and protect the safety of the system. Since the onset of the financial crisis, it has become evident that the legal frameworks for resolving troubled banks vary widely across countries. This lack of uniformity between resolution regimes (and, in many instances, the total absence of such regimes) has proved inadequate when dealing with large distressed specialized and/or universal financial institutions, particularly when they had foreign branches and subsidiaries. The immediate consequence has been a disorderly intervention by financial authorities in many countries, which required immense liquidity support for financial institutions and asset guarantees worth several trillion dollars in total.

Keywords

Bank Failure Market Discipline Prudential Regulation Corporate Bankruptcy Resolution Regime 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.Faculty of Economics Department for Money and FinanceUniversity of LjubljanaLjubljanaSlovenia
  2. 2.Amsterdam Center for Law & Economics (ACLE)University of AmsterdamAmsterdamThe Netherlands
  3. 3.De Nederlandsche BankAmsterdamThe Netherlands

Personalised recommendations