Importance The need to maintain the stability of the national banking system requires resorting to financial recovery and resolution of commercial banks. The article systematizes the main strengths and weaknesses of this tool to regulate banking activities, its effect on the industry's development and social welfare. Objectives The study discusses financial resolution of commercial banks along with conventional tools of the State regulation so to keep the stability of the entire financial system of the nation. For this, we consider benefits and adverse effects of using the financial recovery procedure in banking as compared with discontinued operations and recall of banking licenses. Methods The methodological and theoretical basis includes the conceptual provisions of financial recovery as a part of crisis management, as well as the study of national and foreign scholars in banking regulation. Results The federal legislation governs financial recovery of credit institutions, with authority to initiate such recovery assigned to the Deposit Insurance Agency. The positive effect of financial recovery is observed soon after the financial recovery commences, while negative effect is seen in the medium and long term. We summarized results of financial resolution of banks in Russia, analyzed its effect on the industry's competition, and evaluated costs for bank resolution and financial recovery. Conclusions and Relevance The materials of the research may be used for further researches into this subject, being helpful in designing mechanisms for regulating banking activities in order to ensure sustainable development.
Keywords: banking regulation, financial resolution, bankruptcy, bank, deposit insurance system, Russian banking system
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