Skip to main content
  • This website sets cookies on your device. To find out more about how we use cookies please refer to our Privacy and Cookie Policy. By continuing to use the site, we’ll assume that you are content for us to set these on your device.
  • Close
Home > Financial Stability > Resolution
 

Resolution

The question of who pays when a bank fails has challenged policymakers since banks were first established. Resolution provides an answer to that question. Resolution changes the answer from the taxpayer to the shareholders and unsecured creditors of the firm. A credible resolution regime promotes market discipline and acts to remove any implicit subsidy.

During the financial crisis, governments felt compelled to bail out failing banks rather than risk the negative consequences that a disorderly failure would have had on the wider economy and financial system if the bank had been placed into insolvency. At that time there were no effective arrangements for resolution in place.
 
Following the crisis, there have been a number of legislative changes to build comprehensive resolution frameworks to deal with bank failure and remove the public subsidy for banks that were once considered ‘too big to fail’. 
 
The Bank has published its approach to resolution in the following document:
 

What happens when a bank fails? graphic

Share