New rules implemented following the financial crisis of 2008 laid out standardised tools and powers for national authorities to deal with failing banks, with the intention of minimising the negative impact of bank failures on taxpayers, without jeopardising the financial system as a whole. The first stage is Recovery, with the intention of bringing a failing bank back to health, if this doesn’t work, the next stage is Resolution.
Resolution is where a bank is failing or likely to fail and there is no prospect of recovery. In this scenario, the resolution authority will, if it is in the public interest, step in and take control of the bank in a safe and controlled manner with the intention of protecting financial stability.
Key learning objectives:
Understand the Resolution stage of Recovery and Resolution
Identify some real-world examples of Recovery and Resolution being implemented