Global financial regulators on Monday claimed significant progress in ending “too big to fail” and ensuring that the world’s largest banks can collapse without taxpayer bailouts, The Wall Street Journal reported yesterday. The regulators said that banks must change the way that they fund themselves to better weather a crisis, a proposal that could require some firms to issue billions in new debt and possibly dent profits. The proposal from the Financial Stability Board (FSB) aims to ensure that the cost of a giant bank’s failure is borne by its investors — not taxpayers — by forcing the 30 biggest global banks to have big financial cushions that can absorb losses as a bank is failing and recapitalize the firm after it is seized by the government. The preliminary agreement, which comes six years after the 2008 financial crisis, is “a watershed in ending ‘too big to fail’ for banks,” said Mark Carney, the governor of the Bank of England and FSB chairman. The FSB proposal, coupled with another agreement struck last month on swaps contracts, will create “a world where the largest, most complex banks can be resolved without the need for taxpayer support and without disruption to the wider system,” Carney said.
