Bank Resolution and Insolvency Ranking and Priorities

Bank resolution, and the tool of write-down and conversion of capital and debt instruments (bail-in) try to enhance financial stability, prevent systemic risk, and prevent moral hazard, which has been implemented in crises times without much consideration to its implications on insolvency law, especially creditors' ranking and priorities, which is considered a matter of public order. Bank resolution claims to be aligned with insolvency law, but pursues different objectives, and subjects itself to different principles, which, once a hard case arises, will be a source of tension if a consistent interpretation is needed before bank resolution and its bail-in tool are to be deployed. This chapter explores that tension between resolution provisions and insolvency law, first in isolation, then in combination with the recent quasi-prudential rules that try to create a 'new' layer of debt susceptible to bail-in, and, then, adding the cross-border dimension. The resulting picture does not try to offer definitive answers, but at least ask pertinent questions.