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Taxpayer bailouts for banks 'too big to fail' to end by 2022
Taxpayer bailouts for banks 'too big to fail' to end by 2022
This is a duplicate of the Blog Entry made on: 8th November 2016 14:45
This is a duplicate of the Blog Entry made on: 8th November 2016 14:45
The UK's banks should no longer be "too big to fail", under revised rules announced by the Bank of England.
The regulations will force banks to hold enough money from their investors to absorb losses without help from the taxpayer. If any bank does face collapse, the funds will be spent to finance an orderly wind-down. The Bank's governor, Mark Carney, said the new rules were a "significant milestone". "The implementation of [the rules] will ensure that banks that provide essential economic functions hold sufficient resources to be resolved in an orderly way, without recourse to public funds, and whilst allowing households and businesses to continue to access the services they need," he said. About 400 banks and building societies will have to hold a collective cushion of £223bn, raised by selling bonds (glorified IOUs) to investors, but the current shortfall is estimated at only £20bn.
Banking crisis
The new rules were first suggested in the aftermath of the 2008-2009 banking crisis when the UK government had to spend £115bn to rescue the Lloyds Banking Group and the Royal Bank of Scotland from imminent collapse. The then chancellor, Alistair Darling, said at the time that RBS had been within just a couple of days of having to shut down its ATM machines because it was about to run out of cash. At one point, the direct government subsidy to the entire UK banking industry reached more than £1tn, according to the National Audit Office. If an insolvent bank does have to be rescued by being sold off or broken up, the investors' funds will be used to keep it going in the interim without taxpayers being asked to dip into their pockets....Read more here
The regulations will force banks to hold enough money from their investors to absorb losses without help from the taxpayer. If any bank does face collapse, the funds will be spent to finance an orderly wind-down. The Bank's governor, Mark Carney, said the new rules were a "significant milestone". "The implementation of [the rules] will ensure that banks that provide essential economic functions hold sufficient resources to be resolved in an orderly way, without recourse to public funds, and whilst allowing households and businesses to continue to access the services they need," he said. About 400 banks and building societies will have to hold a collective cushion of £223bn, raised by selling bonds (glorified IOUs) to investors, but the current shortfall is estimated at only £20bn.
Banking crisis
The new rules were first suggested in the aftermath of the 2008-2009 banking crisis when the UK government had to spend £115bn to rescue the Lloyds Banking Group and the Royal Bank of Scotland from imminent collapse. The then chancellor, Alistair Darling, said at the time that RBS had been within just a couple of days of having to shut down its ATM machines because it was about to run out of cash. At one point, the direct government subsidy to the entire UK banking industry reached more than £1tn, according to the National Audit Office. If an insolvent bank does have to be rescued by being sold off or broken up, the investors' funds will be used to keep it going in the interim without taxpayers being asked to dip into their pockets....Read more here