A game of bank resolution

Abstract

Before the 2008 financial crisis, credit institutions were aware that if they were large enough they would be rescued with tax-payers’ money, an action also known as bail-out, what became known as “too big to fail”. The BRRD proposes a legal framework that aims at eliminating the possibility of bailing-out credit institutions. This paper has the objective of assessing through a game theory analysis to what extent the BRRD has the potential to achieve its purpose and if there are identifiable improvements to this framework that could be considered for practical purposes or for a possible review of the framework.

Keywords

• banking
• bank resolution
• bank supervision
• brrd
• game theory