Discussion paper

DP14724 Bank Resolution Regimes and Systemic Risk

We 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, we show that systemic risk, as measured by △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.


Beck, T, D Radev and I Schnabel (2020), ‘DP14724 Bank Resolution Regimes and Systemic Risk‘, CEPR Discussion Paper No. 14724. CEPR Press, Paris & London. https://cepr.org/publications/dp14724