To this end, a new international standard on the recovery and resolution of systemically important institutions has been developed by the Financial Stability Board. Having this new standard is a big step forward. At the European level, a central pillar of the envisaged banking union is the Single Resolution Mechanism.
This instrument will allow authorities to restructure or resolve banks without putting taxpayers’ money at stake. In the future, whenever a bank fails, resolution costs must be borne first by shareholders and creditors. After that, a bank-financed resolution fund is to come into play, and only as a last resort are public funds to be used and the taxpayers made to pay.