The United States

Abstract

Chapter 4 turns to the US, which is a leading jurisdiction in formulating bank resolution rules. As early as the 1950 Federal Deposit Insurance Act (FDIA), the Federal Deposit Insurance Corporation (FDIC) was equipped with administrative resolution powers to resolve failing depository institutions. The 2010 Dodd-Frank Act extends FDIC's resolution powers to non-bank financial institutions and bank holding companies. However, in spite of the leading role of the US formulating domestic rules, the US pays little attention to cross-border bank resolution issues. One of the reasons might be that the US incorporated the UNCITRAL Model Law on Cross-border Insolvency (MLCBI) into Chapter 15 of its Bankruptcy Code, which is very effective in resolving cross-border corporate insolvency cases. Chapter 15 mainly targets the decisions of judges, but it can also apply to administrative resolution actions. However, Chapter 15 is inadequate to address cross-border bank resolution cases. First, Chapter 15 explicitly excludes foreign banks (depository institutions) with branches or agencies in the US, and all US branches or agencies of foreign banks are subject to US resolution authorities. It makes it almost impossible for US authorities to recognise or enforce foreign resolution actions imposed on US branches or agencies of foreign banks. Second, Chapter 15 adopts the distinction of centre of main interest (COMI)/establishment, which is the manifestation of modified universalism as currently adopted in international insolvency law. However, this may not be suitable for financial institutions that are subject to the supervisory home/host distinction, although it is argued in Chapter 6 of this book that home jurisdiction can be understood as COMI jurisdiction, and host jurisdiction can be understood as establishment jurisdiction. Third, the effects of recognition in Chapter 15 only mention reliefs, including both automatic reliefs and discretionary reliefs. However, it is uncertain how US judges would react to relief requests related to foreign resolution actions. Fourth, Chapter 15 grants public policy exceptions for refusal of recognition and additional safeguard measures to refuse relief requests, with the purpose of protecting US creditors' interests. While it may be justifiable to invoke public policy exceptions in cross-border bank resolution cases, a broad application of additional safeguard measures may impede cross-border resolution. Judges in previous Chapter 15 cases interpreted public policies narrowly, and it is suggested that for resolution cases, such an interpretation method should also apply. And for cross-border bank resolution cases, it is recommended that specific public policies should be clearly listed, just as the EU does.