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Global Watchdog to Set Creditor-Loss Rules for Failing Banks

Jim Brunsden
Bloomberg [1]
Sept 2, 2013

Global regulators said they would seek to protect taxpayers from having to bail out failing banks by drawing up international rules on creditor losses.

The Financial Stability Board will propose rules next year to ensure that big banks and other too-big-to-fail financial institutions hold subordinated debt and other liabilities that can be written down in an emergency. The group will also address provisions in derivatives contracts that can deepen crises.

Regulators across the world have been grappling since the 2008 financial crisis to make markets more resilient and to take taxpayers off the hook for rescues. European Union nations alone provided 1.7 trillion euros ($2.2 trillion) of support to their banking systems since the collapse of Lehman Brothers Holdings Inc., according to EU data.

“While much has been accomplished over the past few years, more needs to be done,” Bank of England [2] Governor Mark Carney [3], the FSB’s chairman, said in a statement. “Cross-border cooperation agreements must be struck, and policies for gone concern loss absorbing capacity should be developed.”

Full article here [1]