BWC’s Future of Finance Working Group continues its financial stability series with its second paper, examining what the 2023 failures of Silicon Valley Bank and Credit Suisse reveal about the post-crisis bank resolution framework.
The paper recommends treating resolution as a safeguard established in advance, with strategies that remain effective under pressure for any institution whose failure could pose systemic risk, regardless of size. This requires strong preparation and multiple resolution options rather than reliance on a single preferred approach. Strategies such as single-point-of-entry resolution are effective only if they can be executed quickly, requiring authorities to plan around realistic assumptions about available time, funding stability, and the likelihood of finding a buyer.
The paper also notes that cross-border resolution depends on trust and coordination between countries, particularly around liquidity provision during a crisis. It concludes that resolution frameworks should be reinforced, even as regulators weigh reducing broader regulatory burdens, through more risk-based planning, stronger central bank lending capabilities, and continued focus on ensuring these tools work when confidence, not just capital, is at stake.
