US and UK regulators are to announce joint plans for how to deal with failing banks, under measures that they claim will combat the problem of large global financial institutions being 'too big to fail'.
Writing in the Financial Times, Bank of England deputy governor Paul Tucker (pictured) and Martin Grueberg, chairman of the US Federal Deposit Insurance Corporation, have outlined proposals that would force shareholders in both the US and UK to shoulder losses if a global bank fails.
Unsecured bondholders would see their claims written down to cover any losses that shareholders could not, which did not happen during the efforts to shore up banks as the financial meltdown unfolded. They said the plans would also ensure that banks held sufficient capital at the top of their holding structures to protect taxpayers.
Interventions would remove senior management but allow critical functions and healthy subsidiaries to continue operating.
'All countries share a very strong public interest in developing the capacity to resolve global systematically important financial institutions in a credible and effective way,' the regulators said.