Resolution regime is a government created legal framework that resolves a failed bank in an orderly way so the financial markets do not collapse.
Hence, Resolution regime is the bankruptcy code for banks. Banks are unique institutions and hence a usual bankruptcy code applicable for a corporate will not be usable for banks.
The resolution regime is a child of the financial crisis of 2007 and it helps the economy to settle a failed bank without using money of the public and at the same time by avoiding any systemic trouble. When a bank fails, it creates two important outcomes: first, banks should be rescued by using tax payer’s money. Second, it may leave a vacuum in the financial market.
