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Resolution Funding: Who Pays When Financial Institutions Fail?

Author

Listed:
  • Mrs. Oana M Croitoru
  • Mr. Marc C Dobler
  • Johan Molin
Abstract
A key element of the international reform agenda since the Global Financial Crisis has been to strengthen resolution regimes and make government bailouts the last, not first, resort. A new international standard prescribes a range of tools, powers, and funding arrangements needed to resolve “any financial institution that could be systemically significant or critical if it fails.” It recommends having resolution funding arrangements set up in advance, “so that authorities are not constrained to rely on public ownership or bail-out funds as a means of resolving firms.” It leaves open significant flexibility with respect to the arrangements that would provide the resources authorities will need to carry out effective resolution. This paper offers a framework for weighing the relative advantages of different resolution funding options that could meet the standard. It presents the main developments to date and discusses the advantages and disadvantages of different options.

Suggested Citation

  • Mrs. Oana M Croitoru & Mr. Marc C Dobler & Johan Molin, 2018. "Resolution Funding: Who Pays When Financial Institutions Fail?," IMF Technical Notes and Manuals 2018/001, International Monetary Fund.
    • Handle: RePEc:imf:imftnm:2018/001
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=46124
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    Cited by:

    1. Ryan Defina, 2021. "Banking Resolution: Expansion of the Resolution Toolkit and the Changing Role of Deposit Insurers," IADI Policy Briefs 3, International Association of Deposit Insurers.
    2. Andrzej R. Stopczyński, 2020. "Banki na progu upadłości – refleksje nad postępowaniem," Bank i Kredyt, Narodowy Bank Polski, vol. 51(5), pages 517-548.

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