Derivatives and certain other off-balance sheet contracts enjoy special legal protection on insolvent counterparties through a process referred to as close-out netting. This paper explores the legal status and economic implications of this protection. While this protection benefits major...

In the U.S., the insolvency resolution of most corporations is governed by the federal bankruptcy code and is administered by special bankruptcy courts. Most large corporate bankruptcies are resolved under Chapter 11 reorganization proceedings. However, commercial bank insolvencies are governed...

Current proposals for regulatory reform of the financial system to reduce the probability of and damage from the failure of large banks and other complex financial institutions frequently include a requirement for these institutions to prepare a living will. These wills describe how the...

Since the summer of 2007, credit markets in almost all industrial countries have been in substantial turmoil and this has become the focus of intense policy debates. The papers in this volume are contributed by the world's leading financial experts and constitute a thorough examination of the...

The causes of the financial crisis of 2007-09 are many and varied. Indeed, the crisis may be viewed as the product of a perfect storm. This paper identifies the major culprits or sinners of the U.S. crisis and enumerates their more important sins. The culprits include central bankers, commercial...

This paper examines the implications that alternative regulatory structures may have for resolving failed banking institutions. We place our emphasis on the European Union (EU), which is both economically and financially large and has several features relating to cross-border banking in the form...

quot;Too big to failquot; is one of the most frequently used but misunderstood terms in banking in the U.S. Except for a brief period in the mid-1980s after the insolvency of the large Continental Illinois National Bank caught the bank regulators unprepared and they did not fail the bank but...

Recent evidence suggests that bank regulators appear to be able to resolve insolvent large banks efficiently without either protecting uninsured deposits through invoking quot;too-big-to-failquot; or causing serious harm to other banks or financial markets. But resolving swap positions at...

Bank failures are widely feared for a number of reasons, including concern that depositors may suffer both losses in the value of their deposits (credit losses) and, possibly more importantly, restrictions in access to their deposits (liquidity losses). In the United States, this is not true for...