Ceyla Pazarbasioglu, a deputy director in the
"These banks have a global reach and when they fail they have global consequences. We now have internationally agreed principles on the resolution of global banks and systemic institutions, and this is important progress, but we are not there yet. If a cross-border financial institution were to fail tomorrow, it would not be possible to resolve it in an orderly manner.
"What was agreed must be implemented in practice, and more work is needed to make sure that countries can--and have the incentives to--act cooperatively to resolve a failing cross-border bank," said Pazarbasioglu explaining the developing the strategy and tools for dealing with these big global banks was part of the solution to the "too-big-to-fail" problem.
In a recent speech in
In the wake of the global crisis, policymakers from finance ministries, central banks, and banks supervisory agencies agreed on the necessity of having a set of principles and best practices to deal with the failure of big banks that operate across borders.
Assets of some of the largest cross-border banking groups are several times their home country's gross domestic product (GDP) with some of the banking groups typically having over half of their credit risk exposures and staff in other countries or operations. The new measures noted that to avoid the need for a bailout with public funds, big banks needed to carry enough financial capacity to absorb the losses without damaging ripple effects on the financial system and the economy. The IMF issued its last review of progress on bank resolution in
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