November 10, 2010
Cross-Border Resolution Authority II: What Does Basel Want To Do?
Posted by David Zaring

Killing multinational institutions as painlessly as possible isn't easy to coordinate, but, as we know, Basel has suggested an approach to coordinating resolution across borders.  The IMF wants it too, both internationally, and in Europe.

What is it that would happen?  The big convergence mechanism in Basel would require that everyone have similar power to fail a financial intermediary - to build a bridge bank, to act quickly, to stay creditors (possibly absent financial contracts), and so on.  These powers are supposed to get the big international regulators up to snuff on resolution, and Dodd-Frank was passed in part to meet American obligations to Basel in this area.  There's still a lot of daylight between enumerated powers and an actively managed international arrangement - just because powers exist doesn't mean that they will be coordinated across jurisdictions, after all.  So that is a difficult future project for Basel, and takes some more thinking (some American officials find "bail-ins" attractive).  A coordination process between the countries that would do the resolving, which would probably mean the college of supervisors we've had occasion to discuss earlier.

Administrative Law, Financial Crisis | Bookmark

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