The Economics of Bank Bankruptcy Law

This book shows that a special bank bankruptcy regime is desirable for the efficient restructuring and/or liquidation of distressed banks. It explores in detail both the principal features of corporate bankruptcy law and the specific characteristics of banks including the importance of public confidence, negative externalities of bank failures, fragmented regulatory framework, bank opaqueness, and the related asset-substitution problem and liquidity provision. These features distinguish banks from other corporations and are largely neglected in corporate bankruptcy law. The authors, an assistant professor for money and finance and a research economist at the Dutch Central Bank, propose changes in both prudential regulation and reorganization policies that should allow regulators and banking authorities to better mitigate disruptions in the financial system and minimize the social costs of bank failures. Their recommendations are complemented by a discussion of bank failures from the 2007 ́ 2009 financial crisis Front Matter....Pages i-xiii Introduction....Pages 1-4 General Issues in Bankruptcy Law....Pages 5-19 Are Banks Special? Implications for Bank Bankruptcy Law....Pages 21-63 Systemic Crises....Pages 65-84 General Issues on the Structure of Banking Industry....Pages 85-96 Current Bank Bankruptcy Regimes and Recent Developments....Pages 97-131 Optimal Design of Bank Bankruptcy Law and the Bank Failures from the 2007–2009 Financial Crisis....Pages 133-146 Conclusions....Pages 147-148 Appendix....Pages 149-158 Matej Marinč, Razvan Vlahu. Includes Bibliographical References.