The potential economic disruption caused by bankruptcies of non-bank financial institutions could be reduced by:

Question

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Establishing a resolution authority would provide an orderly process for winding down non-bank financial institutions in the event of a bankruptcy, which would reduce the potential economic disruption caused by their failure. This would provide a framework for minimizing the risk of contagion and systemic risk, and would help to protect the broader economy. Strengthening economies of scale, limiting securitization or abolishing the "too big to fail" doctrine may help to reduce the risk or severity of financial crises, but they would not address the specific problem presented by the bankruptcy of a non-bank financial institution.

The Potential Economic Disruption Caused by Bankruptcies of Non-Bank Financial