Political economy of bank insolvency: instability and social reaction to financial collapse

This paper examines bank insolvency from a political economy perspective,showing that its dynamics do not depend only on economic variables, but also on theinstitutional architecture that defines who decides, who bears the costs, and howuncertainty is distributed in society. The analysis proposes an integrated reading ofbankruptcy law -aimed at the protection of credit- and banking law -focused on financialstability and the protection of depositors-, highlighting how both regimes overlap andcondition each other in crisis contexts. It is argued that this convergence is essential tounderstanding the specificity of bank failures and constitutes a decisive component ofeconomic policy, influencing the state's ability to prevent instabilities, manage the socialcosts of collapse, and preserve confidence in the financial system