Business rescue as a mechanism for addressing bank failures: Possible lessons from the American approach
Authors Tinashe Chipatiso, Herbert Kawadza
Affiliations: Legal Consultant, Corporate Law; Senior Lecturer, Banking and Finance Law, University of the Witwatersrand
Source: Journal of Corporate and Commercial Law & Practice, The, Volume 4 Issue 2, 2018, p. 37 – 50
The significant role played by banks in a modern economy is crucial and explains why banks are subjected to extensive regulatory frameworks. Despite such regulation and oversight, banks are nevertheless prone to failure. They too can be susceptible to financial distress and insolvency. Resolution mechanisms such as curatorship have been implemented to address such financial problems. The application and efficiency of that strategy has, however, been subjected to criticism, particularly in South Africa. This article proposes a regulatory change in the form of business rescue to rehabilitate failing banks. More specifically, it argues that business rescue is more efficient and preferred in achieving this purpose. It draws lessons from other jurisdictions such as the United States which implements, or has previously employed, business rescue as a bank resolution mechanism.