Global Bail-In Plan Could Still Leave Taxpayers Holding the Bag | WHAT REALLY HAPPENED

Global Bail-In Plan Could Still Leave Taxpayers Holding the Bag

Global financial regulators have taken a fresh gambit at avoiding future bank bailouts with a recently announced proposal for total loss-absorbing capacity requirements. The Financial Stability Board's plan would require banks to accumulate enough combined capital and long-term unsecured debt to go through a resolution process without relying on taxpayer dollars.

But while some people view the TLAC proposal as a practical alternative to government support, my colleagues at Kroll Bond Rating Agency and I respectfully disagree. While well intended, the plan will not preclude future bank failures or the tendency of governments to rescue large financial institutions. Indeed, even if TLAC requirements are fully implemented, they will only go part of the way in keeping a failed institution’s liabilities from translating to a liability for the sponsoring government.

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