U.S. Bail-Ins – Fed Vice Chair Fischer Says “Preparing A Proposal”
By Mark O’Byrne
GoldCore.com
12 August 2014
U.S. Preparing Bank Bail-Ins – Fed Vice Chair Fischer
Federal Reserve Vice Chairman Stanley Fischer delivered his first speech on the U.S. and global economy in Stockholm, Sweden yesterday.
Fischer headed Israel’s central bank from 2005 through 2013 and is now number two at the Federal Reserve in the U.S. after Janet Yellen.
In a speech entitled, The Great Recession: Moving Ahead, given at an event sponsored by the Swedish Ministry of Finance, Fischer said that the economic recovery has been and remains “disappointing.”
“The recession that began in the United States in December 2007 ended in June 2009. But the Great Recession is a near-worldwide phenomenon, with the consequences of which many advanced economies–among them Sweden–continue to struggle. Its depth and breadth appear to have changed the economic environment in many ways and to have left the road ahead unclear.”
Speaking about the steps that have been taken internationally in order to “strengthen the financial system” and to reduce the “probability of future financial crisis,” Fischer said that the U.S. was preparing proposals for bank bail-ins for “systemically important banks.”
“Additional steps have been taken in some countries. For example, in the United States, capital ratios and liquidity buffers at the largest banks are up considerably, and their reliance on short-term wholesale funding has declined considerably. Work on the use of the resolution mechanisms set out in the Dodd-Frank Act, based on the principle of a single point of entry–though less advanced than the work on capital and liquidity ratios–holds the promise of making it possible to resolve banks in difficulty at no direct cost to the taxpayer.
As part of this approach, the United States is preparing a proposal to require systemically important banks to issue bail-inable long-term debt that will enable insolvent banks to recapitalize themselves in resolution without calling on government funding–this cushion is known as a “gone concern” buffer.”
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