Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 establishes an orderly liquidation authority for systemically important financial institutions. Its primary purpose is to provide a mechanism for resolving large, complex financial firms whose failure could pose a significant risk to broader financial stability, without resorting to taxpayer bailouts.
Mechanism
The mechanism grants the Federal Deposit Insurance Corporation (FDIC) authority to manage the receivership of covered financial companies. This enables the orderly disposition of assets, transfer of operations, and settlement of claims. It involves an assessment process to identify systemically significant firms and the creation of living wills to guide their potential resolution.
Methodology
The methodology behind Title II aims to prevent systemic risk by providing an alternative to bankruptcy for certain non-bank financial companies. It establishes a resolution authority that can intervene early, stabilize a failing firm, and liquidate it in a manner that protects the financial system and minimizes disruption. While not directly applicable to most crypto entities currently, its principles offer conceptual parallels for regulatory discussions concerning large, interconnected crypto platforms.
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