Beyond Bankruptcy: Resolution as a Macroprudential Regulatory Tool
ARTICLE Beyond Bankruptcy: Resolution as a Macroprudential Regulatory Tool Steven L. Schwarcz* Postcrisis efforts to extend bankruptcy-resolution techniques to protect the stability of the financial system have been insufficient, in part because regulators have been conflating bankruptcy’s traditional goals of resolving troubled firms individually with the need to resolve critical elements of the financial system […]The postBeyond Bankruptcy: Resolution as a Macroprudential Regulatory Toolappeared first onNotre Dame Law Review.
ARTICLE Beyond Bankruptcy: Resolution as a Macroprudential Regulatory Tool Steven L. Schwarcz* Postcrisis efforts to extend bankruptcy-resolution techniques to protect the stability of the financial system have been insufficient, in part because regulators have been conflating bankruptcy’s traditional goals of resolving troubled firms individually with the need to resolve critical elements of the financial system […]The postBeyond Bankruptcy: Resolution as a Macroprudential Regulatory Toolappeared first onNotre Dame Law Review.
Executive Summary
The article 'Beyond Bankruptcy: Resolution as a Macroprudential Regulatory Tool' discusses the limitations of postcrisis efforts to extend bankruptcy-resolution techniques for protecting financial system stability. The author argues that regulators have incorrectly combined traditional bankruptcy goals with the need to resolve critical financial system elements. The article proposes a new approach, focusing on resolution as a macroprudential regulatory tool to enhance financial stability. This approach recognizes the interconnectedness of financial institutions and the need for a more comprehensive framework to prevent systemic risk. The article contributes to the ongoing discussion on financial regulation and stability, highlighting the importance of a nuanced understanding of bankruptcy and resolution in the context of systemic risk.
Key Points
- ▸ Inadequacy of postcrisis bankruptcy-resolution techniques
- ▸ Conflation of traditional bankruptcy goals with systemic risk resolution
- ▸ Need for a macroprudential regulatory approach to resolution
Merits
Comprehensive framework
The article provides a comprehensive framework for understanding the limitations of current bankruptcy-resolution techniques and the need for a more nuanced approach to resolving systemic risk.
Demerits
Lack of empirical evidence
The article could benefit from more empirical evidence to support its arguments and demonstrate the effectiveness of the proposed macroprudential regulatory approach.
Expert Commentary
The article 'Beyond Bankruptcy: Resolution as a Macroprudential Regulatory Tool' offers a thought-provoking analysis of the limitations of current bankruptcy-resolution techniques in the context of financial system stability. The author's proposal for a macroprudential regulatory approach to resolution is well-reasoned and highlights the need for a more nuanced understanding of the interconnectedness of financial institutions and the potential for systemic risk. However, the article could benefit from more empirical evidence to support its arguments and demonstrate the effectiveness of the proposed approach. Overall, the article contributes to the ongoing discussion on financial regulation and stability, emphasizing the importance of a comprehensive framework for resolving systemic risk.
Recommendations
- ✓ Regulators and policymakers should consider developing a more macroprudential approach to resolution, taking into account the interconnectedness of financial institutions and the potential for systemic risk.
- ✓ Further research is needed to provide empirical evidence supporting the proposed approach and to demonstrate its effectiveness in enhancing financial stability.
