Safe to Fail: How Resolution Will Revolutionise Banking

by Thomas F. Huertas

Banks are entering a new environment. Regulation and supervision are becoming tougher, so that banks will be less likely to fail. If a bank does fail, bail-in rather than bail-out will be the new resolution regime, so that investors, not taxpayers, bear loss. Safe to Fail sums up the challenges that banks will face and how they can meet them.

240 pages, Hardcover

First published July 22, 2014

Reviews

[Jan Bos · Rating 3 out of 5]

Easy read.

The brief overview of the changes in the Basel framework is useful and candid. For example, the author mentions the drawback of limiting bonuses: it also limits the amount subject to deferral and claw-back; and the questionable theoretical basis to mandate central clearing: it moves systemic risks from banks into clearing houses.

The book goes into a fair bit of detail on resolution, for example the need in resolution to have unencumbered assets and hence the need as a going concern to transfer price collateral use (although the link between these two is not well made). The book also frankly discusses the political dimension of resolution: most countries and regulators are reluctant to get involved in resolving offshore parts of a global bank.