The crisis has made it perfectly clear that existing bankruptcy law – for example, Chapter 11 in the US – is not well suited to the peculiarities of the financial system and the dynamics of a financial crisis. As a key requirement, a new regime would have to allow supervisors to choose restructuring over bailing-out and thus avoid unfair burden sharing and moral hazard.
The use of this promising vehicle has been limited to date. The exceptional access criteria focus on the early involvement of the Executive Board. A well-informed and alert Board is the best guarantee that the staff and management do not prejudge the Board’s decisions. It is up to all parties concerned to make sure that the agreed rules are followed.