Assurance in crisis : a critical appraisal of recent developments in the regulation of bank recoveries and resolutions

Abstract

Bank recovery and resolution is the process with which a solvent bank in financial distress is restructured and resolved in order to ensure that it can continue to perform its functions without impacting the financial stability of a state, preventing insolvency in due course. The financial crisis in 2007/2008 exposed the need for a revamp in the regulation of bank recovery and resolution, especially with regards to the involvement of taxpayer money during such a process. On a European Union level, this ‘need’ for change gave rise to the Single Resolution Mechanism (SRM), the Bank Recovery and Resolution Directive (BRRD) and the now infamous concept of “bail-in”. This thesis aims to bring into focus the notions of recovery and resolution by examining the extent to which the numerous legal provisions, past and present, local or otherwise which regulate the concept, afford a sufficient level of assurance in crisis and guidance to all parties who are part of or affected by the resolution process of a bank. This shall be achieved by placing particular focus on the legislative state of play prior to the emergence of recent bank resolution frameworks and by analysing the provisions of the BRRD and selected implementing laws and guidelines applicable within a European context. The study shall also go a step further by directly comparing the European regime with the robust US regime. Finally, the study shall present recent developments post the BRRD’s inception and will attempt to look into the future of bank resolution’s development.