Bank resolution and bail-ins in the context of bank groups

Abstract

The theory of “bail-in” – the writing down of some of the creditors of a troubled financial institution in order to restore balance sheet solvency – is generally discussed as if the institution to be resolved were a single legal entity. This has been true for some of the institutions which have recently been subject to resolution, but for bail-in to be a useful tool it must be capable of being used to resolve the largest systemically important financial institutions. There are not single institutions, but complex groups. This article examines how bail-in techniques can be applied to a variety of different corporate structures, and concludes that although different types of corporate structures must be approached in different ways, there is no structure which renders a bail-in based approach to resolution unfeasible.