The Bank Insolvency: From Lehman Brothers to COVID-19 (International Remarks and National Peculiarities)

A study of the international experience of applicable policies for crisis management in the credit system in bank insolvency, identifies three types of solutions, including: elimination of the "toxic element" in the banking system following the example of "Lehman Brothers" in the US from 15 09 2008 through a voluntary insolvency procedure declared by the bank's management before the respective regulatory body;support for the financially troubled institution through nationalization and a reform plan following the example of Northern Rock in the UK from 2007-2008 and Greek banks from the Greek debt crisis after 2010;liquidation of the "toxic element" in the banking system, following the example of CCB in Bulgaria (2014-2020), through a regulatory insolvency procedure Each of the three policies has its pros and cons, but it definitely has a "stressful" impact on banking systems and economic agents with long-term consequences, incl in the context of the TBTF doctrine On this basis, international regulators are introducing the methodology of bank stress tests for early warning of bank insolvency The study of the experience of the central banks, BIS and ECB for conducting stress tests brings to the fore their grouping by three criteria: first criteria - Type of stress test, which distinguishes stress tests conducted by macroprudential authorities for the purpose of assessing broad systemic risks, stress tests conducted by microprudential authorities for supervisory purposes and stress tests by the internal bank risk management for the purposes of assessing capital adequacy policies;second criteria - Focus of the stress test, which distinguishes systematic assessments at the institutional level, measuring mainly solvency or liquidity, assessments on the first and second pillars of Basel II, as well as assessments of financial instruments, investment portfolios, business sectors from institutional positions to prepare models for decision-making by the central banking management regarding the response to the various risks;and third criteria - Approach to conducting the stress test, which is grouped into two categories, top - down and vice versa, bottom - up These approaches must be tested with the new environment for COVID-19 as a global systemic risk generator Its impact on the creditworthiness of companies, households and the state can be assessed as extremely negative and testing the capital adequacy of commercial banks under BASEL III framework