An approach for initiating interventions for bank recovery
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 13 November 2017
Abstract
Purpose
This paper proposes an objective metric to trigger bank recovery. 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.
Design/methodology/approach
We outline how such a metric could be constructed meeting criteria of adequate loss absorption; distinguishing between weak and sound banks; little susceptibility to manipulation; timeliness; scalable from the individual bank to the system.
Findings
We show how this would have worked in the UK, during 2007-2011.
Originality/value
This approach has the added advantage that it could be extended to encompass a whole ladder of sanctions of increasing severity as capital erodes.
Keywords
Citation
Goodhart, C.A.E. and Segoviano, M.A. (2017), "An approach for initiating interventions for bank recovery", Journal of Financial Regulation and Compliance, Vol. 25 No. 4, pp. 360-380. https://doi.org/10.1108/JFRC-01-2017-0005
Publisher
:Emerald Publishing Limited
Copyright © 2017, Emerald Publishing Limited