May 16, 2013
A senior Bank of England official influential in global policy debates has praised proposed U.S. legislation that would forever end the perception that the biggest banks are too big to fail, providing support for a bipartisan bill that forces the biggest American banks to either make themselves safer or shrink.
Andy Haldane, Bank of England executive director for financial stability, said legislation introduced by Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.) "has attractions" that may have long-term appeal. The bill, dubbed the "Terminating Bailouts for Taxpayer Fairness Act" and introduced April 24, would force banks with more than $500 billion in assets to fund at least 15 percent of their balance sheets with equity capital. If implemented, the largest U.S. banks would have to raise more than $1 trillion in fresh capital, on top of the tens of billions of dollars in capital they've raised over the past year to meet impending requirements.
The proposed legislation and Haldane's cautious support comes as policymakers in Washington and around the world target the phenomenon known as "too big to fail," or the perception that some banks are either so large or so important that government officials would never allow them to default on their obligations.
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