It has been five-and-a-half years since Northern Rock and IKB Deutsche Industriebank became the first of hundreds of banks to be bailed out as a result of the crisis – eventually consuming trillions of dollars of public money in the US and Europe – but the world’s systemically important banks are still too big to fail, and no-one should be expecting the problem to be solved anytime soon, says Mark Branson, head of the banks division at Switzerland’s prudential regulator, Eidgenössische Finanzmarktaufsicht (Finma), in Bern.
Some of the components of a solution are in place, he says, such as the new capital and liquidity buffers that make failures less likely, and the powers handed to national regulators in some countries – including Switzerland, via its banking insolvency ordinance – to forcibly restructure failing institutions. But that is not enough.
“The complexity of the groups, the configuration of their balance sheets and the intertwined nature of the way they do business means the resolution process would still be extraordinarily challenging if we were to be faced with it today,” Branson says.
Read more at: Qand A: Mark Branson on the too-big-to-fail problem, modelling and Basel III - Risk.net
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