Banking crisis management, recovery and resolution planning, and new governance theory: Approaching livingwills as a public-private collaborative form of regulation

Over the last ten years the architecture of financial regulation and supervision in Europe has undergone sweeping changes. The demise of the previous "laissez faire era" unleashed an extraordinary torrent of EU institutional and regulatory reforms. Approaches, methodologies and tools by which financial institutions are regulated have drastically been revised to cope with the increasing complexity of modern financial intermediation. New forms of collaborative and polycentric governance in fact emerged as to better respond to sophisticated market failures, opening up to amplified participation and power-sharing between public and private actors. Crisis management and bank resolution represent an interesting area where regulators reserved some room for a public-private collaborative form of regulation. While there is some extensive scholarship placing recovery and resolution planning at the intersection of ex ante and ex post regulatory strategies, little attention has been paid to the specific modes of interaction between regulators and regulated entities. This study aims to advance knowledge by assessing the main features of living wills regulation in the light of the new governance theory. In so doing, it emphasizes the advantages of a dynamic cooperation between public (governments, regulators) and private (regulated) parties in overcoming looming market failures such as informational asymmetries and moral hazard.