Postcrisis efforts to extend bankruptcy-resolution techniques to protect the stability of the financial system have been insufficient, in part because regulators have been conflating bankruptcy’s traditional goals of resolving troubled firms individually with the need to resolve critical elements of the financial system to ensure its continued operation as a “system.” This requires resolving troubled firms collectively, as well as resolving securities-trading markets and the infrastructure that serves to facilitate that trading. The Article examines how to design that regulation, differentiating three approaches: reactive regulation, which comprises variations on traditional bankruptcy; proactive regulation, which consists of preplanned enhancements that are designed to strengthen or facilitate the resolvability of financial system elements that start to become troubled; and counteractive regulation, which seeks to reduce the need for resolution (and thus is not truly resolution).



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