Have we made major progress towards that? Yes. First, the UK, the EU, the US and many other jurisdictions now have or will soon have the legal powers to break up and wind up failing banks with far less threat to the economy as a whole. These powers include the ability to “bail in” a bank’s creditors, making them not the taxpayer responsible for a failed bank’s losses once a bank’s equity has been exhausted. I should say here that it is crucial that the European Parliament now gives its final approval to the proposed resolution directive. And that the directive and the new “bail in” rules form the bedrock of the new Single Resolution Mechanism for the Banking Union in the Euro Area. Second, in the UK and US legislation – Vickers and Dodd Frank has been passed, structurally separating the activities that systemic banks are allowed to carry out. The aim is to ensure that riskier activities are not cross subsidised by, and do not jeopardise, the essential activities these banks carry out in the domestic economy. The EU is also considering how to address this issue following the Liikanen report. Third, and for the major international banks, with operations in many countries, we are moving towards international agreement on how these giants can be safely resolved. This means standards to ensure banks fund themselves with debt that is in a form that can be safely bailed-in should the bank fail.
In truth, there had been growing pressure throughout that autumn for a leaders’ meeting as the sheer scale of the financial crisis became clear and catastrophe followed catastrophe – Fanny and Freddie, Lehman, RBS – throughout the autumn of 2008. When George Bush announced the summit in October 2008, the focus was on the financial sector. Had the huge injections of public capital into insolvent firms and the public guarantees of liquidity for illiquid ones, stabilised the crisis especially in New York and London? But by the time the leaders met in mid-November, it was clear that not only was the financial sector on its knees but also that the world economy was in imminent danger of falling off the cliff. Leaders were facing not just a financial crisis but the possibility of a global economic depression of 1930s proportions. And it was, I think, that very frightening illustration of our economic interdependence that gave the Washington Summit and the summits that followed it the political energy not only to lay out a programme of reform of international financial regulation but also to commit to a time-bound action plan to meet it. I should note here, that – to paraphrase Harold Wilson – in politics one commits to an action or a date but never both. The G20 Summits of 2008 and 2009 committed to both actions and dates.