IFin Seminar, Denis Gromb, HEC Paris - "Financial Restructuring and Resolution of Banks"
Istituto di finanza
Data: / -
Tema del Seminario: "Financial Restructuring and Resolution of Banks"
Prof. Denis Gromb, HEC Paris
12:15 - 13:30
Aula A-33 (palazzo rosso)
Campus di Lugano
How do resolution frameworks affect the private restructuring of distressed banks? We model a distressed bank’s shareholders and creditors negotiating a restructuring given asymmetric information about asset quality and externalities onto the government. This yields negotiation delays used to signal asset quality. we find that strict bail-in rules increase delays by worsening informational frictions and reducing bargaining surplus. We characterize optimal bail-in rules for the government. We then consider the government’s possible involvement in negotiations. We find this can lead to shorter or longer delays. Notably, the government may gin from committing not to partake in negotiations.