The orderly liquidation authority of the Dodd-Frank Act requires a “minimum recovery” for creditors of troubled systemically important financial institutions.

“The Federal Deposit Insurance Corp. is planning how the agency, as required by the financial reform bill, will ensure creditors receive at least as much in a resolution as they would otherwise in a Chapter 7 bankruptcy,” writes American Banker’s Joe Adler.

But the rules to implement the minimum recovery standard have not yet been made.

"Assuring markets that creditors would be no worse off in a liquidation under OLA is a critical step towards making orderly liquidation a credible option for resolving a failing financial company and ensuring that OLA is effective in reducing systemic risk," said Seth Grosshandler of Cleary Gottlieb.

For the full piece see "Bankruptcy Looms Large in New FDIC Takeovers" (may require subscription).