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Optimal bank recovery

Goodhart, Charles and Segoviano, Miguel A. (2015) Optimal bank recovery. Working paper, WP/15/217. International Monetary Fund, Washington. ISBN 9781513584263

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Abstract

Banks’ living wills involve both recovery and resolution. Since it may not always be clear when recovery plans or actions should be triggered, there is a role for an objective metric to trigger recovery. We outline how such a metric could be constructed meeting criteria of (i) adequate loss absorption; (ii) distinguishing between weak and sound banks; (iii) little susceptibility to manipulation; (iv) timeliness; (v) scalable from the individual bank to the system. We show how this would have worked in the U.K., during 2007–11. This approach has the added advantage that it could be extended to encompass a whole ladder of sanctions of increasing severity as capital erodes.

Item Type: Monograph (Working Paper)
Official URL: http://www.imf.org
Additional Information: © 2015 International Monetary Fund
Divisions: Financial Markets Group
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
G - Financial Economics > G3 - Corporate Finance and Governance > G33 - Bankruptcy; Liquidation
Sets: Collections > Economists Online
Research centres and groups > Financial Markets Group (FMG)
Date Deposited: 17 Nov 2015 12:53
Last Modified: 28 Mar 2017 14:37
URI: http://eprints.lse.ac.uk/id/eprint/64450

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