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Resolution Planning
Resolution planning is the process of preparing strategies to manage the orderly failure of a financial institution.
Meaning in Practice
Banks develop resolution plans outlining how critical functions can continue during distress. Authorities review these plans to ensure losses can be absorbed without systemic disruption.
Why It Matters
Resolution planning reduces taxpayer exposure and limits systemic contagion. It enhances preparedness for financial crises.
Market Impact
Clear resolution frameworks improve investor confidence in large institutions. Uncertainty around failure procedures can increase funding costs.
Example
A systemically important bank submits a detailed “living will” explaining how it could be resolved without government support.
Related Terms
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