...Risk of Failure Remains: The failure of Lehman Brothers Holdings Inc. and its subsidiaries, and subsequent events, spurred regulatory efforts to limit links across financial systems, enhance financial institutions' buffers and enhance resolution frameworks. But the risks of systemic market disruptions, including from the rapid deterioration of a large financial institution, have not been eliminated. The wind-down of Lehman, the largest and most prominent case of disorderly failure to date, gives insight into the issues regulators aimed to address and the challenges that may remain. Not a Perfect Roadmap: Fitch believes Lehman's resolution provides a useful case study to help understand the practicalities of resolving a troubled financial institution. Substantial changes to resolution frameworks in recent years mean Lehman is not a perfect case study for the future (see Appendix 1 for how Lehman's failure may have transpired under the current regulatory framework). Legal Entity Matters in...
