Courts’ Review of Crisis Management Decisions

Abstract

Abstract This chapter analyses courts’ review of crisis management decisions in bank resolution, insolvency, receivership, or the withdrawal of bank licences. It complements Chapter 6. First, it shows how courts have resolved the challenges to the legitimacy of crisis frameworks, including their vast powers and funding schemes, such as deposit insurance and resolution funds. Secondly, it analyses courts’ substantive review under the ‘Takings’ clause of the US Constitution, and the fundamental right to property, in bank crises and sovereign debt crises, as well as their review of crisis ‘triggers’, such as failing-or-likely-to-fail (FOLTF) and the substantive protection of depositors, shareholders, and creditors in resolution and state aid cases. Thirdly, the chapter analyses courts’ case law on the procedural safeguards applicable in bank crisis management, including the ‘arbitrary and capricious’ standard in the US, and ‘good administration and ‘judicial protection’ standards in the EU, also with a brief mention of investment arbitration. Finally, the chapter analyses the cases of cross-border recognition, including within the EU ‘regional’ context, where recognition is stronger, and the broader international context, where it is weaker.