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Posts Tagged ‘Oehmke’

Bank resolution and the structure of global banks

Posted by hkarner - 10. August 2018

Patrick Bolton, Martin Oehmke 01 August 2018, vox.eu

Barbara and David Zalaznick Professor of Business, Columbia University

Associate Professor of Finance, London School of Economics

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 (FDIC and Bank of England 2012, Financial Stability Board 2014). The main idea is that global systemically important banks (G-SIBs) should issue ‚total loss absorbing capital‘ (TLAC) in the form of subordinated long-term debt or equity. These securities would be issued to absorb losses and recapitalise the institution in resolution, with minimal disruption to the bank’s operations and without public support.

But what should these resolution frameworks look like? More importantly, would 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.

Global and local

In our recent work (Bolton and Oehmke 2018), we provide a framework to assess the key trade-offs in cross-border resolution of global banks. The main difficulty in designing effective resolution regimes is the mismatch between their global nature and the national scope of the regulators charged with carrying out their resolution.  Den Rest des Beitrags lesen »

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