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BoE's Tucker: 'US banks no longer too big to fail'
by James Phillipps on Oct 14, 2013 at 07:59
Deputy Bank of England governor Paul Tucker has said that US banks are no longer too big to fail and Europe is ‘not far behind’.
Speaking at the Institute of International Finance in Washington DC at the weekend, Tucker (pictured) said that following the regulatory reforms put in place since the financial crisis, the failure of ‘most’ US banks could be resolved ‘right now’, which he branded a ‘massive signal to markets’.
‘I cannot see how the US administration could persuade Congress to provide taxpayer solvency support to, ie bailout, some of the biggest US banks and dealers,’ he said.
‘I don’t mean it would be completely smooth right now- it would be smoother in a year or so as more progress is made. But in extremis, it could be done now.’
‘Europe has not yet reached the same point, but contrary to some commentary, is not far behind. The necessary legislative regime is close to completion.’
Tucker’s comments come just a week after the five year anniversary of Lehman Brothers filing for bankruptcy, sparking a string of taxpayer-funded bailouts across the US and Europe.
He said under new regulations, shareholders and bond investors will bear the brunt of any losses rather than the state.
He urged regulators around the world to continue to work towards resolving the too big to fail issue, saying ‘it is absolutely essential that the problem is cracked.
‘Nothing is more important to the success of the international reform agenda. Without it, global finance would remain fragile; and to protect against that, the international financial system would Balkanise as individual countries sought to protect themselves. The stakes are high,’ he said.
‘The authorities will have no excuse if they don‟t solve the too big to fail problem through resolution regimes and reforms. The necessary technology is clear. The necessary restructuring of firms is clear. The necessary degrees and forms of cross-border co-operation are clear. It is a matter of: just do it.’
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