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January 28, 2013

Wrangles continue over bank failure plans

Ever since the 2008 collapse of Lehman Brothers, global banking regulators have been searching for a better way to handle failures that cross international lines.

Meeting as the Financial Stability Board, central bankers and regulators from the biggest economies and financial centres agreed to force all of the “global systemically important financial institutions” to write recovery and resolution plans, essentially guidebooks aimed at helping regulators stabilise or wind them down in a crisis.

But crafting these plans, often called “living wills”, has proved harder than expected and the FSB has had to postpone its original end-2012 deadline to later this year. The group is meeting on Monday to discuss resolution, among other thorny issues.

In Washington and London, though, where policy makers were scarred by the damaging failure of Lehman Brothers and the hefty bailout of AIG, there has been more progress. The largest international banks have been required to submit living wills for the first time.”

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Read full Financial Times article here

 
 
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