Big Banks Are Supposed to Fail Without Causing Panics. Is That Even Possible? - Living wills
Global regulators spent more than a decade trying to ensure that a large bank could fail without any government support.
Despite this year’s bank failures, they are still working on it.
“It is shocking to me that after 15 years of costly reform efforts, we still couldn’t resolve even a $200 billion bank like SVB without extraordinary government support,” said Jonathan McKernan, a Republican member of the Federal Deposit Insurance Corp.
The 2010 Dodd-Frank financial overhaul requires the biggest banks to write plans showing how they could be dismantled in bankruptcy without using taxpayer money. If regulators think the so-called living wills aren’t credible, they have the authority to break up the banks.
“Personally I have come to the conclusion…that a globally active systemically important bank cannot simply be wound up according to the ‘too big to fail’ plan,” Swiss Finance Minister Karin Keller-Sutter told a Swiss newspaper in March. “Legally this would be possible. In practice, however, the economic damage would be considerable.”
Bloomberg 14 August 2023
Bank living wills ensure no bank’s failure can create systemic collapses
https://englundmacro.blogspot.com/2022/12/bank-living-wills-ensure-no-banks.html
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