Banks 'no longer too big to fail'

Dec 10, 2012

US and UK regulators draw up cross-border plans in an effort to limit damage to broader economy if banks fail

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In an effort to limit the damage to the broader economy in the event of bank failure, cross-border plans being drawn up by US and UK regulators will mean international banks are no longer "too big to fail", says the Financial Times.  Under the plans, shareholders will be "wiped out" and unsecured bondholders can expect to see their claims "written down" to reflect the losses shareholders cannot cover if banks get into difficulty. So far the plans, which have been devised by Martin Gruenberg, chairman of the US Federal Deposit Insurance Corporation, and Paul Tucker, deputy governor of the Bank of England (pictured), will apply to 12 banks in the UK and the US. Eventually they will be extended to 16 vitally important banks in other countries.  A strategy paper said that senior management would be removed, but critical business functions would continue and healthy operating subsidiaries would be allowed to keep running.

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