By restoring capitalism to the capitalists, discipline in the system will increase and, with time, systemic risks will be reduced. In addition, the knowledge that major firms in markets far away can fail, without meaningful consequences at home, will restore confidence in an open global system and allow Ken and all of us to focus on our day jobs.
To ensure that bondholders, shareholders and management – rather than taxpayers – bear the brunt of losses, all FSB member countries have committed to have in place a bail-in authority and will have specific plans by the end of this year to recover or, if necessary, resolve these firms.