LEADING G20 countries should set up a task force to oversee the creation of cross-border bank “living wills” and make bondholders aware they could take more pain if a lender hits trouble, top bankers said yesterday.
The Institute of International Finance (IIF), a bank lobby group, said “resolution regimes” laid out for banks should make it clear that shareholders, bondholders and depositors not covered by insurance will bear any losses before taxpayers are called on to bail out a bank.
“Not enough loss was imposed on the capital providers [when a bank hit trouble], so looking forward we want to make sure the system is designed with that expectation and those mechanisms in mind,” said Peter Sands, chief executive of Standard Chartered and chair of an IIF committee on effective regulation.
The IIF also said big banks should not be broken up by lawmakers attempting to prevent a repeat of the financial crisis, as risk to the system was “mutating and unpredictable” and was not due to the size of banks.
Banks, through the IIF, are getting more vocal in the face of a raft of regulatory proposals they fear will be uncoordinated and hit their businesses hard. G20 leaders will meet in Canada in June to discuss reforms.
City A.M. Reporter