From bailout to bail‐in: Making banking a legitimate part of the market economy

다국어 초록 (Multilingual Abstract)

More than a decade has passed since Lehman Brothers wreaked havoc to the global economy, putting the spotlight on the ‘too big to fail’ predicament and leaving governments the choice between financial collapse and bailouts. A new framework – resolution – was devised to allow for the orderly management of such situations. While capital regulations remain important for maintaining financial stability, bondholders also need to be on the hook if we are to credibly claim that bailouts belong to the past. In sum, resolution is about nothing less than the restoration of the fundamental principles of the market economy to the banking sector.