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GRA · Financial Stability

Spatial financeWhere capital meets hazard, exposure and transition

Crisis management and resolution

When a financial institution fails, authorities must protect depositors and critical functions, keep markets working and avoid using public money. Crisis management includes the lender of last resort, deposit insurance and, since the global financial crisis, resolution regimes with powers such as bail-in. This page sets out how crisis management and resolution work and where they are tested, the records that show readiness, and who decides.

01Canvas

How the work runs.

Systems · around this subjectIllustrative

Systemic risk dashboard

Crisis management and resolution · Financial system · Committee meeting 2

Housing vulnerabilities elevatedGRA · Financial Stability

Vulnerabilities heat map

percentile vs history, 0 to 100

Exposure network

red: most connected node

Credit-to-GDP gap

Systemic risk dashboard: the screen's structure, terms and states for Crisis management and resolution.Example names and illustrative values; a design, not a record or a live system.

Fig.Systemic risk dashboard: example names and illustrative values, not a record or a live system.

02The question

Crisis management and resolution: how the risk develops.

Recovery, resolution and public authority boundaries. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.

Mechanism

Resolution replaces bailout

Resolution regimes let authorities write down and convert creditors' claims, transfer business and keep critical functions running, so that shareholders and creditors bear losses before taxpayers.

Mechanism

Liquidity in resolution

A recapitalised firm still needs cash. Without access to central bank facilities and resolution funding, a resolution can fail even when the capital plan works.

Mechanism

Cross-border coordination

Global firms operate through many legal entities in many countries. Resolution needs home and host authorities to cooperate, which crisis management groups and agreements prepare.

Mechanism

Credibility shapes behaviour

If creditors believe a firm will be rescued, they lend cheaply and monitor less. A credible resolution regime reduces that implicit subsidy.

03Spatial finance

Settlement dependencies, and what fails with a node.

How a failure at one financial centre can spread through settlement links. Design links, not real dependencies.

Sixteen financial centres, and how a failure at one spreads through settlement links.Design links, not the real dependencies of any infrastructure.
04Indicators

What is measured, and how well.

Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.

IndicatorUnitCadenceSource typeLabel
Total loss-absorbing capacitypercent of risk-weighted assetsquarterlyBank disclosuresPublished statistics
Resolution plans assessed as crediblecount by authorityannualResolution authority reportsPublished statistics
Deposit insurance coverage limitcurrency per depositoron changeInternational Association of Deposit Insurers dataPublished statistics
Implementation of the Key Attributesstatus by jurisdiction and sectorannualFSB resolution reportPublished statistics
Crisis management groups establishedcountannualFSB recordsPublished statistics
Bank failures and resolution actionscount by tool usedannualResolution authority recordsPublished statistics
05Twin and cascade simulator

Trace a shock in crisis management and resolution to the balance sheet.

Assembled from the Nexus Standards area profile Financial stability and prudential risk: the shocks it names, the systems and sectors that carry the loss, the controls that dampen it and the data that observe it. Pick an initiating shock and step through the cascade to see which exposures it reaches and where losses could concentrate. The Map view places the run on an example geography with open data. Every weight is a stated assumption. An exercise, not a forecast, a valuation, a rating or investment advice. To model a place of your own choosing, open the full System Builder.

Hazards

  • Dam failure
  • River flood (set off downstream)
  • Flash flood (set off downstream)
  • Mass displacement (set off downstream)
  • Widespread power outage (set off downstream)
  • Water supply shortfall (set off downstream)

Controls

  • NS-0 Constitution and principles
  • NS-3 Risk record UNIs (grammar, legacy crosswalk, allocation authority)
  • NS-9 Contextual UNIs (deployments, instances, programme instances)
  • NS-10 Policies and clauses (machine-readable obligations: definition, binding, evaluation and enforcement)
  • NS-11 Verification and monitoring (evidence, attestations, zero-trust conformance observation)
  • NS-14 Conformance and crosswalk to external standards
  • NRS-H62 Hazard family: Compound and multi-hazard events (NHS-1 sys.compound)
  • NRS-H113 Hazard family: Financial-system fragility (NHS-1 soc.financial-system)
  • NRS-H118 Hazard family: Organised crime and illicit economies (NHS-1 soc.crime)
  • NRS-H79 Hazard family: Mental health crises (NHS-1 health.mental)
  • NRS-U9 Universe platform profile: Financial Regulation Nexus
  • NRS-C5 Scenarios and stress testing

Observation

  • BIS Data Portal (credit, debt service, property prices, banking statistics) (listed for reference)
  • IMF data services (WEO, IFS, FSI via SDMX) (listed for reference)
  • OECD Data Explorer (SDMX API) (listed for reference)
  • Financial Soundness Indicators
  • Macroeconomic Dashboard

Example geography

  • Western Europe: 152 hexagonal cells
  • Night lights tonight, outages (VIIRS Day/Night Band), NASA GIBS
  • Surface water through cloud, 30 m (OPERA DSWx-S1 radar), NASA GIBS
  • Rain rate, last half hour (IMERG), NASA GIBS
  • Surface soil moisture (SMAP), NASA GIBS
06Sources

Where the evidence comes from.

Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.

SourceWhat it givesLicence class
FSB annual resolution reportImplementation of resolution reforms across jurisdictionsFree, FSB terms
Single Resolution Board decisions and reportsEuro area resolution planning and casesPublic, EU reuse terms
FDIC resolution and failed bank listsUnited States bank failures and resolutionsPublic domain
International Association of Deposit Insurers survey dataDeposit insurance design across countriesFree to read, terms to check
Bank of England resolvability assessment framework disclosuresResolvability self-assessments and supervisory findingsFree, Bank of England terms
07Exposure, loss and capital

What crisis management and resolution means for exposure, loss and capital.

The exposure, loss, scenario and capital views a risk officer, supervisor or ministry of finance would ask for, with the frameworks they report against. Structures follow supervisory and actuarial practice. Values are illustrative: never prices, ratings or advice.

Transmission channels

How a shock in crisis management and resolution reaches credit, market, underwriting, liquidity and operational risk, and feeds back.

Channel structure after the Basel Committee's work on climate-related risk drivers and transmission channels; links shown are typical paths, not estimated exposures.
NGFS climate scenarios · Network for Greening the Financial SystemIFRS S2 Climate-related Disclosures · ISSBTCFD recommendations · Financial Stability Board TCFDPrinciples for the effective management of climate-related financial risks · Basel Committee on Banking Supervision
08Decisions

Who decides, and what the evidence serves.

Financial Stability prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.

Who decidesThe questionEvidence this page serves
Resolution authoritiesWhether a firm is failing or likely to fail and which tool to useResolution plans and legal criteria
Central banksWhat liquidity support to provide in resolutionCollateral and funding needs evidence
Deposit insurers and legislatorsHow coverage and funding are setComparative deposit insurance design
Bank boardsHow to make the group resolvableResolvability requirements and supervisory findings

Outputs this topic produces

  • Guide to resolution tools and the creditor hierarchy
  • Brief on liquidity in resolution
  • Comparative notes on deposit insurance design
  • Questions for boards on resolvability
09Core questions

Shared questions the industry asks.

  1. 01

    Can a firm recover on its own?

    What recovery options institutions plan for and whether they would work in a system-wide crisis.

  2. 02

    Can a firm fail safely?

    Whether resolution tools can keep critical functions running while losses fall on shareholders and creditors.

  3. 03

    Who decides?

    How powers are divided between resolution authorities, supervisors, central banks and finance ministries.

  4. 04

    What about cross-border groups?

    How authorities in different countries cooperate when a group spans jurisdictions.

10Mechanisms

How the risk arises and transmits.

Recovery planning asks institutions to identify actions they could take under severe stress, such as raising capital, selling businesses or reducing risk. In a system-wide crisis, many firms may try the same actions at once.

Resolution frameworks give authorities powers to restructure failing institutions, for example by writing down or converting creditors' claims, transferring businesses or creating bridge institutions, while continuing critical functions.

The aim is to end the expectation that some firms are too big to fail, which distorts incentives and funding costs. Credibility depends on the authorities' readiness and on firms holding enough loss-absorbing resources.

Liquidity in resolution is a persistent challenge. A firm in resolution may need large temporary funding, raising questions about the role of central banks and public backstops.

Cross-border groups complicate resolution. National authorities may protect local creditors and assets, so cooperation agreements and planning matter.

11Methods and limits

How evidence is gathered, and where it stops.

Method or dataWhat it showsIts limit
Resolution planning analysisFeasibility of strategiesPlans are confidential
Case studiesPast failures and resolutionsEach case differs
Legal comparisonPowers across jurisdictionsLaw and practice differ
Simulation exercisesCoordination under stressExercises simplify reality
12Methods

How it is studied, and what the methods cannot say.

  1. Financial economics and macro-financeRun incentives in funds and banks · Leverage cycles · Implicit guaranteesApplied here
  2. Scenario design and stress testingMacro-financial scenario design · System-wide exercises · Reverse stress testsApplied here
  3. Complex systems and agent-based modellingAgent-based market models · Early warning of regime shifts · Feedback loop mappingApplied here
13Questions

Questions and answers.

What is bail-in?
A resolution power to write down or convert into equity the claims of a failing firm's creditors, so they absorb losses and recapitalise it without public money.
What does no creditor worse off mean?
A safeguard that creditors in resolution should not lose more than they would have in normal insolvency proceedings, with compensation if they do.
What is the lender of last resort?
A central bank's role in lending to solvent but illiquid institutions in stress, usually against good collateral at a penalty rate.
Does GRA advise authorities or firms on resolution?
No. It advises no one and has no role in any recovery or resolution decision.
What does too big to fail mean?
The expectation that a firm is so important that authorities would rescue it, which weakens market discipline.
Why are public authority boundaries important?
Because crisis decisions involve public powers and funds, which must stay with accountable authorities.
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Reports is the Consortium's quarterly publication. What you know about this subject can become evidence, a case or a correction in the next edition, credited to you and published under CC BY 4.0 where it is your own work.

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