I have been asked to comment on the rapprochement across the Atlantic between the US and the Uk authorities over how to handle future bank crises.
They are proposing a new regime where banks in trouble are put into controlled adminsitration effectively. Shareholders and bondholders would be at risk. Bondholders of various kinds would be converted into shareholders if the bank can no longer meet all its obligations, so the bank automatically has to pay less interest on its capital and has more equity capital at risk to absorb the lossses. The taxpayer would be less at risk, the capital providers more at risk.
The new regime would allow orderly disposal of the peripheral activities with value. It would allow continuation of the core functions of money transmission and settlement , and allow deposit protection schemes to support depositors to stave off a run.
I do think it is a big advance on conduct in 2007-8. I then wanted them to place highly stressed banks into controlled administration, to protect depositors, but to make shareholders and bondholders take the pain, and sell off the assets that had some value to help pay the bills and slim down the mega banks in trouble. It will still need intelligent bank regulation and Central banking to avoid such accidents in the first place, which is a better answer still than this approach to trouble once trouble has hit.