Bailey tells banks not to rely on state bailouts in the future
BANKS should not rely on taxpayers’ money to bail them out if they are caught out by another crisis, the Bank of England’s executive director for banking services Andrew Bailey said yesterday, echoing comments made by the Bank’s deputy governor Paul Tucker on Monday.
Speaking in Madrid, Bailey said: “We cannot justify having a banking system that depends on the use of public money to douse the fire when the crisis comes. And we also cannot allow conditions to exist where risks are taken on the basis that this backstop exists.”
Bailey focused his speech on what role he saw for banks’ living wills. Like Tucker, he said that there was a place for contingent capital instruments – known as CoCos – in banks’ recovery plans.
Bailey added that banks should play a vital role in establishing these recovery plans. “Resolution plans must be produced and owned by the authorities, since only we can determine how best to apply the tools of our regime. But firms have a vital role to play in these plans,” he said.
He concluded by saying that authorities in the UK were “very keen” to see real implementation of recovery plans.