Barbara Romaine

Irit Mevorach

Janis Sarra

Ronald Davis

Stephan Madaus

Monica Marcucci

Riz Mokal

Ignacio Tirado

Political boundaries are often porous to finance, financial intermediation, and financial distress. Yet they are highly impervious to financial regulation. When inhabitants of a country suffering a deficit of purchasing power are able to access and deploy funds flowing in from a country with a surfeit of such power, the inhabitants of both countries may benefit. They may also benefit when institutions undertaking such cross-border financial intermediation experience economies of scale and are able to innovate and to offer funds and services at lower costs. Inevitably, however, at least some such institutions will sometimes act imprudently, some of the projects in which such funds are deployed may be unwise, and other such projects can suffer from unforeseen circumstances. As a result of such factors, a financial institution may suffer distress in one country, and may then transmit such distress to other countries in which it operates. The efficacy of any response to such cross-border transmission of distress may turn on the response being given due effect in both (or all) the territories in which the distressed financial institution operates. This situation creates a conundrum for policymakers, legislators, and regulators who wish to enable those subject to their jurisdiction to access the benefits of cross-border financial intermediation, yet cannot make rules and regulations that would have effect outside that jurisdiction. This book explores this conundrum and offers a response. It does so by drawing on and adding to the literatures on financial intermediation, regulation, and distress, and on existing hard and soft laws and regulations. The book advocates for the creation of a model law that would address the full range of financial institutions, including insurance companies, and that would enable relevant authorities to cooperate with counterparts in advance of the onset of distress and to give appropriate effect in their jurisdiction to measures taken by counterpart authorities in other jurisdictions in which the distressed institution also operates.

Recovery, Resolution, and Recognition

Financial Institutions in Distress

A fresh and insightful guide to post-financial crisis cross-border insolvency, this book interrogates the current regime and sets out a pattern to improve its future. In recent decades, and especially since the global financial crisis, a number of important initiatives have focused ondeveloping effective solutions for managing the insolvency of multinational enterprises and financial institutions. Irit Mevorach here takes stock of the varying success of previous policy, and identifies the gaps and biases that could be bridged by a new approach.The book first sets out the theoretical debates regarding cross-border insolvency and surveys the strengths and weaknesses of the prevailing method - modified universalism - synthesizing divergences into a rubric for both commercial entities and financial institutions. Adhering to these norms morerobustly, Mevorach argues, would enhance global welfare and produce the best outcomes for businesses and institutions.Drawing upon sources from international law as well as behavioural and economic theory, Mevorach considers how to translate modified universalism into binding international law and how to choose the right instrument for cross-border insolvency; the impact instrument design has on decisions andchoices, and how to encourage compliance. In particular, the book proposes tools and mechanisms that could potentially overcome, or at least take into account, behavioural biases in decision-making in order to create a system that works for businesses, and offers a blueprint for the future ofcross-border insolvency.

Overcoming Biases and Closing Gaps

The Future of Cross-Border Insolvency

Irit Mevorach

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