Copying and distributing are prohibited without permission of the publisher.


Bank resolutions: long weekend

By Tyler Davies
25 Apr 2019

Patience is a virtue for anyone looking to challenge decisions made during a bank resolution.

Policymakers have made a lot of the idea that bank resolutions need to happen quickly.

The goal is to pack the work into a “resolution weekend”, allowing an institution to fail on a Friday and find itself rescued by the time markets open again on Monday.

But if this initial process is speedy, the aftermath of a bank resolution is showing itself to be anything but.

Indeed, investors looking to challenge a resolution decision should be prepared to wait a very long time for any sense of conclusion.

Last week, a Dutch court said that it needed further information from experts before it could decide whether creditors were entitled to compensation following the nationalisation of SNS.

It has been more than six years since the Dutch government took the firm public, longer than the time in which SNS had been listed on the Amsterdam stock exchange.

Similarly, investors in Banco Popular, which failed in 2017, are still waiting for courts to determine whether they are right to claim they were made worse off in the resolution than they would have been in an insolvency.

This is not necessarily a bad thing. Judges are clearly taking challenges to bank resolutions very seriously, listening to both sides of the arguments at length.

But market participants need to recognise that the world may have changed dramatically before a firm conclusion is made on any case.

In the fallout of a bank resolution, patience is crucial.

By Tyler Davies
25 Apr 2019