Banking Resolution: Expansion of the Resolution Toolkit and the Changing Role of Deposit Insurers

Defina, Ryan (2021): Banking Resolution: Expansion of the Resolution Toolkit and the Changing Role of Deposit Insurers. Published in: International Association of Deposit Insurers Policy Brief

Abstract

In this Policy Brief, we provide quantitative evidence demonstrating that the resolution toolkit has expanded considerably since the 2008 Global Financial Crisis (GFC). Purchase and assumption transactions, bridge bank facilitation and bail-in mechanisms have all become more available for bank resolution purposes. The use of such resolution tools is increasingly subject to least cost rules and to systemic failure considerations. These resolution tools may be available to different authorities, such as deposit insurers or resolution authorities, depending on the jurisdiction in question. Two of the three statistical models applied point to a significant increase in resolution powers for deposit insurers.

• Item Type: MPRA Paper
• Language: English
• Keywords: deposit insurance; bank resolution
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G3 - Corporate Finance and Governance > G33 - Bankruptcy ; Liquidation

References

Baudino, P., Defina, R., Fernández Real, JM., Hajra, K., Walters, W. (2019). Bank failure management – the role of deposit insurance. Financial Stability Institute Insights No. 17.

Croissant, Y. (2020). pglm: Panel Generalized Linear Models. R package version 0.2-2.

Croitoru, O. Dobler, M., Molin, J. (2018). Resolution Funding: Who Pays When Financial Institutions Fail? International Monetary Fund Technical Guidance Note.

Defina, R. (2021). The Geographic Dynamics of Deposit Insurance. International Association of Deposit Insurers Policy Brief No. 2.

European Central Bank. (2019). What is a lender of last resort? European Central Bank Explainers.

European Union. (2014). Bank Recovery and Resolution Directive 2014/59/EU. Official Journal of the European Union.

Financial Stability Board. (2012). Thematic Review on Deposit Insurance. Financial Stability Board publication.

Financial Stability Board. (2014). Key Attributes of Effective Resolution Regimes for Financial Institutions. Financial Stability Board publication.

Hsiao, C. (2003). Analysis of Panel Data (2nd ed.). New York, NY: Cambridge University Press.

International Association of Deposit Insurers. (2014). IADI Core Principles for Effective Deposit Insurance Systems (revised). International Association of Deposit Insurers publication.

Kane, E., Demirguc-Kunt, A. (2001). Deposit Insurance Around the Globe: Where Does it Work? NBER Working Paper No. 8493.

Pearl, J. (2009). Causal inference in statistics: An overview. Statistics Surveys Vol. 3. No. 96-146.

Preston, J. (2005). Decomposition of Movement Estimates as a Diagnostic Tool for Repeated Business Surveys. Australian Bureau of Statistics Research Paper No. 1352.0.55.073.