Who Pays for Bank Insolvency?

THORSTEN BECK World Bank, Washington DC BETHANY BLOWERS Analyst in the Domestic Finance Division, Bank of England HENK BROUWER Executive Director of De Nederlandsche Bank PEIK GRANLUND Lawyer in the Finnish Financial Supervisory Authority CHRISTOS HADJIEMMANUIL Senior Lecturer in Law, London School of Economics LIISA HALME Chief Legal Cousel, Financial Supervisory Authority of Finland GERBERT HEBBINK Senior Economist at the Financial Stability Department of De Nederlandsche Bank EVA HÜPKES Head of Regulation, Legal Department of the Swiss Federal Banking Commission EIGIL MØLGAARD Legal and Financial Adviser, formerly Director General of the Danish Financial Supervisory Authority JÓN SIGURÐSSON President and Chief Executive, Nordic Investment Bank GARY STERN President, Federal Reserve Bank of Minneapolis SANDRA WESSELING Senior Economist, Directorate Supervision of De Nederlandshe Bank GARY YOUNG Senior Research Manager, Domestic Finance Division, Bank of England

List of Tables List of Figures Preface Acknowledgements Notes on the Contributors Introduction PART I: THE PROBLEM AND THE PROPOSED SOLUTION An Overview of the Issues; D.G.Mayes The New Approach to Orderly Bank Exit: Questions and Answers; A.Liuksila PART II: HOW BIG IS THE PROBLEM? Disclosure as a Cure for Moral Hazard: Necessary but Insufficient; G.H.Stern The Incentive Compatible Design Of Deposit Insurance and Bank Failure Resolution: Concepts and Country Studies T.Beck Small Countries, Large Multi-Country Banks: a challenge to supervisors - the example of the Nordic-Baltic area; J.Sigurðsson The Economic Impact of Insolvency Law; B.Blowers & G.Young Do Bank Exit Regimes affect Banking Conditions?; P.Granlund PART III: APPROACHES TO SOLVING THE PROBLEM A European Approach to Banking Crises; H.Brouwer, G.Hebbink & S.Wesseling Avoiding a Crisis: Lessons from the Danish Experience; E.Mølgaard Learning Lessons and Implementing a New Approach to Bank Insolvency Resolution in Switzerland; E.H.G.Hüpkes Bank Resolution Policy and the Organization of Bank Insolvency Proceedings: Critical Dilemmas; C.Hadjiemmanuil Appendix 1: The Proposed Approach to Bank Insolvency Legislation; D.G.Mayes, L.Halme & A.Liuksila Appendix 2: The Basel Committee Guidance on Weak Banks References Index