An influential group of MPs have urged for a radical overhaul of the British banking system to protect taxpayers from future bail-outs.
The Commons Treasury committee released a report on Monday on institutions which are “too big to fail”. The report said that radical overhaul of the way the British banking sector is managed is required to prevent the repetition of the autumn 2008 crisis.
The report suggests a number of reforms such as the introduction of tighter capital requirements, restrictions on total borrowing. It also suggests some structural reforms to make the winding up a failing bank easier.
The Committee also supported the idea of “living wills”, which would require banks to make provisions for their failure.
The report stated, “Living wills, fully applied, will necessarily lead to the structural reform of the banks.”
It should be noted here that the emergence of the “too big to fail” banks compelled governments to bail them out at the peak of financial crisis in 2008.