Higher capital and liquidity requirement will be eminently sensible to make such larger firms internalize the costs of their externalities. The use of contingent capital can be explored once the details of this proposal are formulated. Apart from the quantitative parameters, the institution’s business model and its legal structure should also dictate the quantum of higher capital requirement.
Less complex and less interconnected firms may have to be provided a different leeway. The “winding down plan” seems useful since it will force the Board to understand group structures and raises the credibility of the threat.