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Lesson 6d-iPromspt restolutioln “bankruptcy”

  • Problem: Bankruptcy resolution is too slow for financial institutions.

    • Shareholder approval is needed for “forced merger” (bailout)

    • Prompt resolution framework that was introduced only for commercial banks (and executed by FDIC) after the S&L crisis

  • Debt-overhang problem Extend prompt resolution framework to all financial institutions (worldwide) Convert long-term debt in equity if needed

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