Nov. 15 (Bloomberg) -- Bundesbank board member Andreas Dombret said policy makers must develop instruments that would allow systemically important financial institutions, so-called SIFIs, to default in an orderly fashion.
“Failures are part and parcel of a market economy,” Dombret said in a speech in Frankfurt today. “SIFIs, too, must be able to exit the market in an orderly manner that does not expose taxpayers to the risk of loss.”
Global regulators are seeking to shore up the financial system after the credit crunch of 2008 led to taxpayer-funded bailouts. Deutsche Bank AG, BNP Paribas SA and Goldman Sachs Group Inc. are among 29 banks considered systemically relevant that must hold additional capital buffers ranging from 1 to 2.5 percentage points under plans approved this month by the Group of 20 nations.
“National resolution regimes are clearly stretched to their limits when it comes to globally operating SIFIs,” Dombret said. “One of our main tasks in the coming months will therefore be to ensure mutual compatibility between different national resolution regimes.”
Dombret also said regulators “have to act fast” to prevent banking activities from “being shifted to less regulated areas,” or the so-called shadow-banking system, as a result of stricter rules.
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