WASHINGTON Jan 23 Big banks still pose a threat
to the world financial system because there is a general
assumption that governments will come to their rescue in case of
trouble, an International Monetary Fund executive said on
"It is astonishing that officials in countries are still
largely ill-equipped to deal with a Lehman Brothers-style
bankruptcy, where assets and liabilities are scattered across
multiple jurisdictions and entities," Jose Vinals, tasked with
financial oversight at the IMF, said in a blog post.
The 2008 bankruptcy of investment bank Lehman Brothers
marked the height of the global credit crisis, and many of the
reforms that have since been implemented were aimed at
preventing a repeat of such a collapse.
During the financial crisis, a number of the world's big
banks were bailed out by governments with billions of dollars in
"The not-so-good news is that, despite these efforts,
implicit subsidies to these systemically important financial
institutions remain too large," Vinals said, who said a related
IMF study was due in April.
The problem of so-called too-big-to-fail banks is a priority
for regulators in the Group of 20, which is due to convene in
November and expected to discuss a global financial reform
agenda, Vinals said.
The G20 includes Argentina, Australia, Brazil, Canada,
China, France, Germany, India, Indonesia, Italy, Japan, the
Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa,
Turkey, the UK, the United States and the European Union.
The Basel III bank capital rules require banks to borrow
less to fund their business, so they are better able to deal
with problems. Governments have also told banks to draw up plans
that would enable them to systematically unwind their businesses
if the necessity arose.
The United States and Europe are putting into place
so-called resolution authorities that would protect the wider
financial system without the use of taxpayer funds in the event
a bank needed to be bailed out.
Vinals said the G20 had "yet to do much of the heavy
lifting" to sort out what would happen if a bank with major
operations abroad were to go under.