Institutional arrangements for bank resolution

The Financial Stability Board's Key Attributes of Effective Resolution Regimes for Financial Institutions, adopted in response to the Great Financial Crisis, is the global standard for bank resolution frameworks.

Core to the institutional arrangements for resolution specified by the Key Attributes is an administrative resolution authority that is operationally independent. Irrespective of where resolution functions are located – eg within the central bank, the supervisory authority or the deposit insurer – there should be governance arrangements and mechanisms to control any conflicts of interest that arise between resolution and other functions carried out by that authority.

This paper reviews the institutional arrangements for bank resolution frameworks in 16 jurisdictions. The analysis shows that conflicts of interest between the resolution and supervisory functions can arise irrespective of whether they are institutionally co-located or separate. A key factor in all types of arrangement is balancing operational independence for the resolution function with structures that allow it to benefit from synergies with the supervisory function.

JEL classification: G21, G28, K23

Keywords: resolution, resolution authority, supervision, institutional arrangements, operational independence, mandates, conflicts of interest