## Trade-offs in Bank Resolution

_Staff Discussion Notes, February 9, 2018_

## Source details

**Canonical URL:** [Trade-offs in Bank Resolution](https://www.imf.org/en/publications/staff-discussion-notes/issues/2018/02/09/trade-offs-in-bank-resolution-45127)

## Other formats

- [Markdown version](/en/publications/staff-discussion-notes/issues/2018/02/09/trade-offs-in-bank-resolution-45127/index.md)
- [Structured JSON version](/en/publications/staff-discussion-notes/issues/2018/02/09/trade-offs-in-bank-resolution-45127/index.json)
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## Bibliographic details
- Authors: Giovanni Dell'Ariccia, Deniz O Igan, Elsie Addo Awadzi, Marc C Dobler, Damiano Sandri
- Published: February 9, 2018
- Series: Staff Discussion Notes
- DOI: https://doi.org/10.5089/9781484341001.006

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### Overview
- Title: Trade-offs in Bank Resolution
- Authors: Giovanni Dell'Ariccia, Deniz O Igan, Elsie Addo Awadzi, Marc C Dobler, Damiano Sandri
- Publication type: Staff Discussion Notes
- Date: February 9, 2018
- Summary of the note:
  - Revisits the debate on bank resolution regimes.
  - Presents a simple model of bank insolvency that transparently describes the trade-off involved between bail-outs, bail-ins, and larger capital buffers.
  - Looks for empirical evidence to assess the moral hazard consequences of bail-outs and the systemic spillovers from bail-ins.

### Model and trade-off analysis
- Core analytical focus:
  - A simple model of bank insolvency framed to make transparent the trade-offs between:
    - bail-outs,
    - bail-ins,
    - larger capital buffers.
- Intended analytical goal:
  - To clarify how different resolution tools interact with incentives and stability outcomes.

### Empirical assessment
- Empirical objectives:
  - Assess the moral hazard consequences of bail-outs.
  - Assess the systemic spillovers from bail-ins.
- Methodological note:
  - The note combines the theoretical model with empirical investigation to evaluate the real-world implications of different resolution regimes.

### Subjects and keywords (areas emphasized)
- Subject areas:
  - Bank resolution
  - Bank resolution framework
  - Banking
  - Financial crises
  - Financial sector policy and analysis
  - Financial sector stability
  - Moral hazard
  - Spillovers
- Keywords (explicit):
  - bail in, bail-in power, bail-in process, bail-in regime, bail-out expectation, bank equity, Bank resolution, Bank resolution framework, bank stakeholder, central bank, equity capital, EU bail-in event, Financial regulation, Financial sector stability, Global, holding company, Moral hazard, public funds, recognition clause, resolution regime, SDN, Spillovers

### Use cases and audience
- Target readership:
  - Policymakers and regulators concerned with bank resolution regimes.
  - Researchers studying moral hazard, financial stability, and resolution tool design.
  - Practitioners evaluating trade-offs among bail-outs, bail-ins, and capital regulation.

*Staff Discussion Note: "Trade-offs in Bank Resolution", Giovanni Dell'Ariccia et al., February 9, 2018.*

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## Content in this bundle

- **Staff Discussion Note**
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  - [Staff Discussion Note (PDF)](/-/media/files/publications/sdn/2018/sdn1802-trade-offs-in-bank-resolution.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/staff-discussion-notes/issues/2018/02/09/trade-offs-in-bank-resolution-45127_