New global rules to stop tax-payer bail-outs of banks are being formulated by global regulator the Financial Stability Board.
In future, big banks will have to hold more money in order to survive big losses while shareholders would be the first to suffer losses if banks could not pay from their own resources.
Mark Carney, governor of the Bank of England, called the plan a “watershed” moment, saying it had been "totally unfair" for taxpayers to bail out banks after the financial crisis of 2008 and 2009.
"Instead of having the public, governments, [and] the taxpayer rescue banks when things go wrong; the creditors of banks, the big institutions that hold the banks' debt - not the depositors - will become the new shareholders of banks if banks make mistakes."
Hundreds of billions were poured into banks “too big to fail” during the crisis, with the British taxpayer alone subsidising more than £1 trillion at the peak, according to the National Audit Office.
The capital set aside should be worth 15-20% of the bank's assets, the FSB said. That is a far bigger hedge against losses than currently required.
The FSB has published a list of 30 banks it regards as "systemically important", meaning their collapse could have a wider impact on global financial systems.
In the UK, they are Barclays, Standard Chartered, HSBC and the Royal Bank of Scotland.
Lloyds Banking Group has been removed from the list as its potential impact on financial systems has declined in recent years.
The proposed rules should come into force in 2019 after a period of consultation.
Comments
If retail banking were separate, there would be no question of the small account holder being in jeopardy. And those who invest in the gambling type of bank would know that they could lose their investment.
Who were left with old BES so lost their money whilst the big creditors walked across into Novo Banco - which this new regulation will limit.
But far more interesting - given that the retarded Portuguese courts will get these Portugues claimants no-where ... is what those going through developed countries courts will achieve.
Like Argentina these guys have long memories and deep pockets. And their own judges making judgements.
So - why was East Timor offering training schemes to Portuguese Judiciary and magistrates ? Introducing these 'brightest and best' Portuguese to more developed country judicial practices.
And what exactly went wrong ? Did these Portuguese trainee judges think they had permission to actually make judgements ?
Had they been watching too much Judge Judy so thought it was easy ?