Insolvency of Significant Non-Financial Enterprises: Lessons from Bank Failures and Bank Resolution

In the aftermath of the global financial crisis the EU bank resolution regime went through fundamental changes that seek to preserve financial stability and ensure continuity of critical functions. The same cannot be said of insolvency rules applicable to non-financial enterprises. Unlike bank resolution with its macroprudential and proactive focus, insolvency law has largely remained microprudential and reactive. Admittedly, unlike bank failures, corporate insolvencies usually do not pose systemic risk. However, in practice this may not hold true for significant non-financial enterprises (SNFEs). Such enterprises oftentimes play a major role in national economies and serve important public functions. Their failure may trigger contagion and cause disruptive consequences. Insofar as insolvency of SNFEs raises concerns common to bank failures, the question arises whether certain strategies and tools embraced within the EU bank recovery and resolution framework should be extended to regulate SNFE insolvency. This article explores the feasibility of such an extension. Bank resolution, insolvency, significant non-financial enterprises, enterprise groups, Carillion, early intervention, recovery and resolution planning, living wills, public interest, systemic risk, critical functions.