FT column.
Call-out text states it plainly enough:
Until recently it was generally assumed that when a bank ran into problems it would either be bailed out or go spectacularly bust.
Well, unlikely Kazakhstan provides a better example: getting the creditors to suffer the pain. They absorb all or most of the losses, keeping the bank a going concern.
Says Tett, “In America, there is every chance that the future financial reform bill will contain some features that would impose creditor losses in the future.”
The big question? Is this discipline imposed by a central 3rd party or the courts.
Investment groups hate the notion, but Tett calls it the least bad option.
How democratic.
Meanwhile, she laments the alternative that Europe seems to be pursuing: “a system based on ever tighter bank rules and implicit taxpayer bail-outs.”