Era of too big to fail nearly over

Tim Wallace
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BRITAIN and Germany are set to become the first governments to pull their support from banks, shifting the cost of any future collapse from the taxpayer and on to investors, Standard and Poors said yesterday.

Such a move represents the end of the “too big to fail” era, when governments were so scared of bank collapses that they spent billions of pounds propping up bust lenders.

The bail-in rules come into force on 1 January 2015, a year earlier than planned. When banks get into trouble, shareholders and investors will pay up, not governments.

As a result the ratings agency plans to put banks in the countries on negative rating watch while the full impact of the new rules is evaluated.