This paper analyzes the incentive effects of special bank resolution schemes which were introduced during the recent financial crisis. These schemes allow regulators to take control over a systemically important financial institution before bankruptcy. We ask how special resolution schemes...

The paper provides a simple model for interbank loans. Since interbank trades are usually over-the-counter transactions, we use a bilateral bargaining model and apply the Nash bargaining solution. We determine the threat points and the bargaining frontier of debtor and creditor banks. We ask...