Improving the bank resolution mechanism

Abstract

One of the main unresolved issues in financial regulation is how to deal with banks that fail. The collapse of several banks in different countries demonstrated the immense costs of failure of such an institution. In this line discovering rules for an effective bank resolution mechanism represents an important challenge for regulators and banks’ specialists from all around the world. The clarification of the rules for Bank resolution mechanism’s design is a very prevailing topic for them. The research results include recommendations to improve the resolution mechanism. Among the most important addressed issues are adjustments to re-design the process of resolution tools use in the spirit of not allowing the distortion of effective competition in the financial market, and the promotions of measures to reduce the moral hazard of banking institutions being under the resolution regims for long-term. JEL: B1, B2, G5, K2, O3.