Living Wills: Hard to do?

Saturday, August 15th, 2009

There was an idea gathering steam lately.  The G20 group of central bankers and finance ministers met in London over the week to require firm-specific contingency plans from systemic firms.  Due to the widespread chaos caused by Lehman Brothers’ bankruptcy last September, a lot of regulators are finding a way to unwind the global financial giants.  One way to do this is prepare for a “living will” to guide their orderly demise.

The concept had wide appeal.  This crisis convinced regulators and politicians of all colors to allow large financial institutions to fail without imposing huge burden on taxpayers.  This may be a possible alternative to an intrusive regulation as seen by bankers.  However, drawing up a “living will” in detail may be easier said than done.  According to Clifford Chance’s Simon Gleeson, it’s more important for legislators and regulators to establish resolution regime and cross-border crisis-management than for these individual firms to be prepared for their own demise.

Some issues posed by financial crisis may be politically challenging, and some may be intellectually difficult.  And, devising a “living wills” legal framework manages to be both.  If there’s any solution to deal with a future Lehman, it may still remain a long way.

Tags: bankers, Clifford Chance, crisis, financial giants, Lehman Brothers, living wills, London, ministers, regulators, Simon Gleeson, will, Wills
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