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The paper by Assist. Prof. Deyan Radev, PhD “Bank Resolution Regimes and Systemic Risk” (with Prof. Thorsten Beck (Cass Business School) and Prof. Isabel Schnabel (Executive Board of the European Central Bank)) has been accepted in the renowned Discussion Paper series of the Center for Economic Policy Research (CEPR) (DP14724) and has featured in the VoxEU blog. The paper is also available on SSRN.




In the paper, the authors assess the ability of bank resolution frameworks to deal with systemic banking fragility. Using a novel and detailed database on bank resolution regimes in 22 member countries of the Financial Stability Board, they show that systemic risk, as measured by Delta CoVaR, increases more for banks in countries with more comprehensive bank resolution frameworks after negative system-wide shocks, such as Lehman Brothers’ default, while it decreases more after positive system-wide shocks, such as Mario Draghi's “whatever it takes” speech. These results suggest that more comprehensive bank resolution may exacerbate the effect of system-wide shocks and should not be solely relied on in cases of systemic distress. The authors argue that bank resolution regimes may benefit from a macroprudential design, including a strictly defined financial stability exemption from bail-in rules during periods of systemic distress.


The paper has been presented at the Federal Reserve Board, Bank for International Settlements, European Central Bank, European Systemic Risk Board, Single Resolution Board, Bank of England, Cass Business School, the Universities of Bonn, Frankfurt, Mannheim and Munich, as well as the conferences of the American and European Economic Associations. Invited talks at the German Federal Financial Supervisory Authority (BaFin) and the American Federal Deposit Insurance Corporation (FDIC) are postponed due to the COVID-19 pandemic.




Disclaimer: This paper should not be reported as representing the views of the European Central Bank (ECB).