International financial authorities need to collaborate on establishing legal frameworks for handling the potential collapse of large, globally interconnected b

Swiss Finance Minister Calls for International Rules on Winding Up Global Banks


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Image credit: Stephen Dawson

International financial authorities need to collaborate on establishing legal frameworks for handling the potential collapse of large, globally interconnected banks, according to Switzerland's Finance Minister Karin Keller-Sutter.

The Issue:

  • The concept of "too big to fail" banks raises concerns about how to manage their collapse without crippling the financial system.
  • Standardisation of international rules is seen as crucial for effective handling of such situations.

The Swiss Perspective:

  • Keller-Sutter highlights the potential legal roadblocks in winding up such banks due to their complex international structures.
  • She cites the case of Credit Suisse, a Swiss bank that faced collapse last year, as an example of these challenges.

The Proposed Solution:

  • Keller-Sutter advocates for discussions with the Financial Stability Board and other finance ministers, including her German counterpart Christian Lindner.
  • Her focus lies on mitigating the risks associated with a "bail-in" approach, where creditors are forced to absorb losses to recapitalize the failing bank.

The Call to Action:

  • The need for international cooperation in establishing clear and effective legal frameworks for winding up globally interconnected banks is being emphasized by the Swiss Finance Minister.

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