Measures to protect against this risk could include: the subordination of all GLAC liabilities, to reduce creditor uncertainty about the position of GLAC liabilities in the hierarchy of claims; limitations on the term of GLAC liabilities, to guard against the potential for runs on GLAC; and measures to limit cross-holdings of GLAC by other financial institutions, to reduce the prospect of losses on GLAC holdings significantly weakening other parts of the financial system.
We have seen that in times of uncertainty financial markets often shoot first and ask questions later, so the task of protecting against contagion should not be underestimated. 3  There are examples from the recent crisis, and previous ones, where large banks have been resolved by imposing losses on their shareholders, junior bondholders and, in some cases, their senior bondholders.