US and European governments have spent trillions of dollars propping up banks to avoid a broader financial system meltdown during the crisis over the past two years. Regulators have been devising ways to ensure that even the biggest banks can be wound down quickly if they are insolvent without destabilising the broader financial system. The Basel Committee of central bankers and supervisors from the G20 group of leading countries published its final recommendations that seek to mesh national approaches into a more coordinated global approach to too big to fail.
“Based on the lessons of the crisis and our analysis of national resolution frameworks, I believe that implementation of the Committee’s recommendations will help make meaningful progress toward addressing systemic risk and the too-big-to-fail problem,” its chairman, Dutch central bank chief Nout Wellink said in a statement.
Finding international consensus on individual measures to tackle “too big to fail” banks is tricky as countries push for different remedies that need global backing to work properly.
FSA chairman Adair Turner said he was facing opposition from other countries over his wish for capital surcharges on bigger banks. “We are a bit of an outlier in the UK at the moment,” Turner told a hearing on the future of banking. “There is pushback from continental Europe. They speak of the virtues of large, diversified universal banks, that the crisis has proved the value of the continental model,” he said.