In 2008 the largest cross-border banks were too big to fail and had to be
bailed out, inappropriately penalising taxpayers and rewarding bank investors. This
paper reviews the major progress since then in seeking to end ‘too-big-to-fail’. This
has involved several strands: the development of resolution regimes; the negotiation
and agreement of cooperative resolution strategies for global systemically-important
banks (G-SIBs); the identification of barriers to resolvability; and paving the way to
removing those barriers.Acrucial aspect of this is requiring all banks to have sufficient
loss-absorbing capacity to ensure their orderly resolution. Following adoption by the
G20 of the Financial Stability Board’s standard on total loss-absorbing capacity
(TLAC), the UK authorities have recently published their policy on TLAC and its
Bank Recovery and Resolution Directive equivalent Minimum Requirement for Own
Funds and Eligible Liabilities (MREL)—the minimum requirement for own funds and
eligible liabilities. The provisions link both the quantum and quality of TLAC or
MREL resources to the preferred resolution strategy, whether that is bail-in, partial
transfer or liquidation, on a case-by-case basis. This ensures that a one-size-fits-all
approach is not taken to resolution of different types of bank. The UK rules also
provide a degree of flexibility to UK banks in meeting their MRELs, both by specifying
appropriate transitional arrangements and by making the final requirements
subject to review by the UK authorities. This will take into account any changes to the
UK regulatory environment in coming years and the actual experience of UK banks in
raising loss-absorbing resources.

EB00000003677K

Available

• Ending Too-Big-To-Fail: Progress Since the Crisis, the Importance of Loss-Absorbing Capacity and the UK Approach to Resolution