FRANKFURT--Rules that force a bank's creditors to lose
money, rather than the taxpayer, may be insufficient to address the problem of
banks being too big to fail, said Andrew Haldane, the Bank of England's
executive director for financial stability Tuesday.
"Faithful implementation" of the regulatory reform
agenda that has been pursued in stages since the financial crisis of 2008 is
"an absolute necessity," said the BOE official at a conference here
on the future of the banking sector. He said, however, that such a move is
"necessary, but perhaps not sufficient."
The central banker said, "when a big bank fails, bail
in is never a soft option...the temptation is always there for governments to
reach for the check book," referring to when creditors are forced to take
losses. He said the temptation to bail out rather than bail in was
"irresistible."
Mr. Haldane said that to get past this problem authorities
needed to have set rules that "tied their hands" and that tougher
capital standards for banks should be considered. He referenced a proposal in
the U.S. to up the leverage ratio for some banks to 15%, rather than the 3%
envisaged in international rules known as Basel III.
"I don't have a magic number, but I do think the time
is right within Europe to reopen the debate about whether 97%-debt financed
banks is a suitably proved endpoint," he said.
The event was organized by the German Green Party
http://online.wsj.com/article/BT-CO-20130528-703047.html
Sunday, 9 June 2013
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