Cross-default dilemma

Cross-default debacle

Richard Tredgett

Resolution of a failing financial institution is simple enough to explain. Rather than let a bank spectacularly blow up, resolution authorities would step in just before insolvency, save the systematically crucial functions that can be saved and wind down the parts that can’t in an orderly way – potentially helped by recapitalisation measures.

Easy to explain, extraordinarily complex to put into practice. To pick on just one element, there is the risk that a bank entering into resolution would

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