The orderly restructuring or wind-down of a failing financial firm without taxpayer support. Bail-in converts creditors' claims into equity to recapitalise it.
Where you will meet it
Resolution comes up in 8 learning outcome notes across the FRM syllabus.
A few of them:
Central Clearing FRM Part I · Financial markets and products
“Risk is concentrated in a small number of CCPs that are too important to fail, so supervisors insist on strict standards and recovery and resolution plans.”
The Governance of Risk Management FRM Part I · Foundations of risk management
“Dodd-Frank (2010) created the Financial Stability Oversight Council, the Volcker Rule limiting proprietary trading, stress tests, resolution plans (living wills) and board risk committees.”
Margin (Collateral) and Settlement FRM Part II · Credit risk measurement and management
“Because the agent is normally an interested party, the other side can dispute a calculation, and the agreement then sets a resolution process.”
Digital Resilience and Financial Stability: The Quest for Policy Tools in the Financial Sector FRM Part II · Current issues in financial markets
“Others are direct oversight of critical third-party providers with concentration limits and exit plans, coordinated crisis playbooks, recovery and resolution planning, and risk transfer or backstop arrangements.”
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