Bank Resolution Plans as a catalyst for global financial reform

Bank Resolution Plans (Living Wills) should help with the resolution of systemically important financial institutions (SIFIs) in distress. They should be used to clarify and simplify the legal structure and make it commensurate with the functional business lines of the institution. Living Wills could also prove the right regulatory instrument to achieve two further innovations in the resolution of SIFIs with cross-border presence. First, they could incorporate burden sharing arrangements between countries enabling burden sharing on an institution by institution basis. However, there would remain problems arising from the incompatibility of the laws governing cross-border bank insolvencies. Many countries are currently introducing special laws covering the resolution of SIFIs. This creates a window of opportunity to use Living Wills to introduce a second innovation: a consistent legal regime for the resolution of SIFIs across the G20 countries.

► The paper examines how Bank Resolution Plans can help to resolve large banks in distress.
► Bank Resolution Plans should clarify and simplify the legal structure.
► An international burden sharing arrangement can help to resolve cross-border banks.
► The paper proposes a consistent legal regime for the resolution of SIFIs across the G20 countries.