British and U.S. banking regulators proposed on Monday a joint strategy to ensure that the bankruptcy of big banks won't spark a chain reaction of contagion throughout markets, Agence France-Presse reported yesterday. The two bodies, acting on behalf of the two largest financial centers in the world, stressed that under the proposals, shareholders and not taxpayers would bear the full costs, and top managers would be let go. At the Bank of England, deputy governor for financial stability Paul Tucker said, "The 'too big to fail' problem simply must be cured. We believe it can be and that this joint paper provides evidence of the serious progress that is being made." The British and U.S. authorities said in a joint statement that the financial crisis had "driven home the importance of an orderly resolution process for globally active, systemically important, financial institutions" that have foundered. They said that their solutions, which would target the parent of any finance house in trouble, "have been designed to enable large and complex cross-border firms to be resolved without threatening financial stability and without putting public funds at risk." The statement said that the British part of the strategy is intended to fit with the powers provided by the UK Banking Act of 2009 "and in anticipation of the further powers that will be provided by the European Union Recovery and Resolution Directive." In the U.S., the measures would work in the context of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
