What is Resolution Corporation?
- Establishment of a Resolution Corporation is proposed in the FRDI bill.
- This corporation which will monitor financial firms and it will calculate their stress and take "corrective actions" in case of a failure.
- This Corporation will group the banks or financial firms on their risk factors.
- Risk factors are categorized as low, moderate, material, imminent, and critical.
- During critical condition, the Corporation will take over and resolve issues within a year.
- The corrective measures are merger or acquisition, transferring the assets, liabilities to another firm, or liquidation.
- The number of employees in the stressed firm can be cut down, employees can be transferred and issue pay-cuts. Beyond two years, the firm would be liquidated.