Prepare for worst, says BoE's Tucker

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S should implement procedures to limit damage to the economy in the event that they collapse, the deputy governor of the Bank of England Paul Tucker told the BBA conference yesterday.<br /><br />Tucker said that the social contract between banks and society needed to be redrawn and called on lenders to keep information on how they would fund themselves in a crisis, to be given to central banks in the event of an emergency.<br /><br />He warned that collating such information was &ldquo;not going to be cheap&rdquo;, but said such measures would allow for an &ldquo;orderly wind down&rdquo; if a lender fails.<br /><br />He also suggested that banks would need to undergo a &ldquo;radical simplification&rdquo; of how they are structured in order to temper the risk they could pose to the economy.<br /><br />&ldquo;Banks can&rsquo;t live in a world where the upside goes to shareholders and boards, while the downside goes to the taxpayer,&rdquo; he said.<br /><br />Tucker added that deposit insurance schemes needed to be 100 per cent pre-funded, to ensure that depositors of struggling lenders did not launch a run on their bank in fear of losing their funds.