Assessing the Legal Challenges of the Bank Resolution Bill from a Comparative Perspective

Document Type : Scientific research

Authors

Zahra Khoshnoud ¹

Ali Allahyarifard ²

¹ Faculty Member of Banking Law Department, Monetary and Banking Research Institute (MBRI), Central Bank of the Islamic Republic of Iran

² 2-Researcher, Banking Law Department, Monetary and Banking Research Institute (MBRI), Central Bank of the Islamic Republic of Iran

https://doi.org/10.22067/economlaw.2025.94547.1476

Abstract

Given the broader legal implications of bank insolvency compared to corporate bankruptcy, and the necessity to distinguish between bank suspension and general bankruptcy to maintain financial stability, regulatory authorities in various jurisdictions have developed specialized bank resolution frameworks. In Iran, the Banking System Resolution Bill was submitted to the Islamic Consultative Assembly in February 2024, highlighting the need to examine its legal challenges in comparison with other legal systems, particularly the EU and Malaysia, while assessing its compatibility with existing domestic banking laws.

This study employs an analytical-descriptive methodology and library resources to evaluate the bill. The findings reveal that while the proposed resolution framework shows progress, it faces significant legal challenges, including: (1) ambiguity regarding the legal nature of resolution decisions and civil liability of the Resolution Executive Board members; (2) potential conflicts with property rights and contractual freedom principles; (3) lack of clarity concerning the deposit guarantee fund's payment mechanisms; (4) differential treatment of state-owned versus private banks in resolution processes; (5) inconsistencies between resolution and bankruptcy procedures; and (6) unclear resolution methodologies.

For successful implementation, the bill must integrate international best practices with domestic legal requirements. Key recommendations include: clarifying the legal status of resolution decisions, enhancing procedural transparency, ensuring harmony with existing regulations, incorporating Sharia-compliant approaches for liability transfers (as advised by the Central Bank's Sharia Council), and strengthening inter-agency coordination among legislative and regulatory bodies. These measures would significantly enhance the effectiveness of Iran's bank resolution regime while maintaining financial stability and protecting stakeholder rights.

Keywords

Resolution

Bankruptcy

Bail-in

Banking Stability

Subjects

• Banking law

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