Bail-ins and Bail-outs Are Better than Bankruptcy: A Comparative Assessment of Public Policy Responses to COVID-19 Distress

Entry in Oxford Business Law Blog.


COVID-19 has significantly disrupted the conduct of business around the globe. In jurisdictions that impose one or more ‘lockdowns’, multiple sectors of the real economy must endure prolonged periods of reduced trading or even total shutdowns. The resulting revenue losses will—absent some intervention by the state, or voluntary accommodation from creditors and counterparties—push many businesses to default on debts as they fall due. In a new working paper, we consider how policymakers should respond to the emergence of such a cohort of newly defaulting debtors. Our conclusion is that, even in jurisdictions with an insolvency framework that functioned well in pre-pandemic times, policymakers should consider routes to delivering relief outside this framework, rather than risk distorting this framework to accommodate the peculiar features of COVID-19 distress.