The UK’s banks should no longer be “too big to fail”, under revised rules announced by the Bank of England.
The regulations will force banks to hold enough money from their investors to absorb losses without help from the taxpayer.
If any bank does face collapse, the funds will be spent to finance an orderly wind-down.
The Bank’s governor, Mark Carney, said the new rules were a “significant milestone”.
“The implementation of [the rules] will ensure that banks that provide essential economic functions hold sufficient resources to be resolved in an orderly way, without recourse to public funds, and whilst allowing households and businesses to continue to access the services they need,” he said.
About 400 banks and building societies will have to hold a collective cushion of £223bn, raised by selling bonds (glorified IOUs) to investors, but the current shortfall is estimated at only £20bn.
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