Banks’ provisions for future failure are up to scratch across the world, the Financial Stability Board said, but there are still qualms about loopholes in the law, flexibility for multinational groups, and whether investors know what they're getting into.
Under global norms, which came into effect in January, lenders must issue assets worth 16 percent of their risk-weighted assets in a form that can be jettisoned if they're about to go bust. That capacity means it's bank investors, not taxpayers, who must absorb losses needed to keep the institution’s essential functions running.
Shareholders with skin in the game will be more likely to force poorly run banks to change their ways, the reasoning goes.
Banks' failure cushions not sufficiently mobile, FSB says
2 July 2019 9:33pm