U.S. and UK to test big bank collapse in joint model run

Oct 10 (Reuters) – Regulators from the United States and the United Kingdom will get together in a war room next week to see if they can cope with any possible fall-out when the next big bank topples over, the two countries said on Friday.

Treasury Secretary Jack Lew and the UK’s Chancellor of the Exchequer, George Osborne, on Monday will run a joint exercise simulating how they would prop up a large bank with operations in both countries that has landed in trouble.

Also taking part are Federal Reserve Chair Janet Yellen and Bank of England Governor Mark Carney, and the heads of a large number of other regulators, in a meeting hosted by the U.S. Federal Deposit Insurance Corporation.

“We are going to make sure that we can handle an institution that previously would have been regarded as too big to fail. We’re confident that we now have choices that did not exist in the past,” Osborne said at the International Monetary Fund’s annual meeting.

Six years after the financial crisis, politicians and regulators around the globe are keen to prove they have created rules that will allow them to let a large bank go under without spending billions in taxpayer dollars.

They have forced banks to ramp up equity and debt capital buffers to protect taxpayers against losses, and have told them to write plans that lay out how they can go through ordinary bankruptcy. The plans are so-called living wills.

Written by: RANDALL PALMER and DOUWE MIEDEMA – continue reading at REUTERS

 

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