LONDON, March 17 The world's biggest banks still
could not be dismantled safely more than five years after the
collapse of Lehman Brothers, the Bank of England's Deputy
Governor for Financial Stability Jon Cunliffe said on Monday.
Cunliffe said setters of international standards have made
progress in reforming banking rules since the U.S. lender went
under in September 2008 but more needs to be done.
Implementing ambitious rules to make banks hold more capital
and avoid needing recourse again to taxpayers' money has been
impressive but the core task of ending "too-big-to-fail banks"
remains, Cunliffe told a Chatham House financial conference.
He urged the European Parliament to give final approval to a
new European Union law that gives national regulators in the
28-country bloc powers to wind down ailing banks.
But even with the powers to impose losses on bondholders of
failing banks to shield taxpayers, further steps were needed.
"I do not think we can say with confidence now that we could
resolve a failing global giant," said Cunliffe, Britain's former
ambassador to the EU in Brussels.
Last year, Cunliffe's predecessor Paul Tucker surprised many
in the financial sector by saying a giant bank could now be
wound down, albeit not totally smoothly.
Heads of the G20, the world's leading 20 economies, will
meet in Brisbane, Australia in November and agreeing new rules
to end too-big-to-fail banks was perhaps the most important
regulatory priority for the summit, Cunliffe said.
The success of the G20's regulatory reforms will hinge on
their consistent application across the world and mutual trust
among financial supervisors to avoid unintended consequences, he
The EU has expressed alarm that the United States is forcing
offshoots of foreign banks to hold capital there to keep U.S.
taxpayers off the hook if a foreign lender goes bust, even as
Europe introduces reforms to reduce chances this will happen.
Cunliffe echoed this European concern.
"Regulators and supervisors who cannot trust the
implementation of standards in other jurisdictions will defend
stability in their own jurisdictions by raising barriers," he
"Such action minimises the risk of international crises, but
the cost is the rolling back of financial globalisation with
less effective and efficient intermediation on global savings."
Without mutual trust there is a risk of more crises and
fragmentation in global markets, Cunliffe said.
The International Monetary Fund and the G20's Financial
Stability Board, chaired by BoE Governor Mark Carney, can play
key roles in establishing mutual trust, Cunliffe said.