Quantcast
Channel: The Harvard Law School Forum on Corporate Governance
Viewing all articles
Browse latest Browse all 158

Bank Resolution and the Structure of Global Banks

0
0
Posted by Patrick Bolton (Columbia University) and Martin Oehmke (London School of Economics), on Wednesday, July 25, 2018
Editor's Note: Patrick Bolton is Barbara and David Zalaznick Professor of Business at Columbia Business School, and Martin Oehmke is Associate Professor of Finance at the London School of Economics and Political Science. This post is based on their recent paper. Related research from the Program on Corporate Governance includes The Resolution of Distressed Financial Conglomerates by Howell E. Jackson and Stephanie Massman; and Containing Systemic Risk by Taxing Banks Properly by Mark J. Roe and Michael Troege.

How should prudential regulators deal with global banks that are too big to fail? Many see bank resolution as the key element in dealing with this challenge. The main idea is that global systemically important banks (G-SIBs) are required to issue a sufficient amount of “total loss absorbing capital” (TLAC) in the form of subordinated long-term debt or equity. These securities are issued for the purpose of absorbing losses and recapitalizing the institution in resolution, with minimal disruption to the bank’s operations and without public support.

But what should these resolution frameworks look like and, most importantly, will they work? Much hinges on this question, given that there are currently around thirty G-SIBs, with total exposures equal to more than 75% of global GDP in 2014.

(more…)


Viewing all articles
Browse latest Browse all 158

Latest Images

Trending Articles





Latest Images