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Borders undermine drive to solve "too-big-to-fail" banking problem 

May 18, 2015


Regulators are worried that patchy application in Europe and beyond of new rules to solve the problem of banks that are "too big to fail" could make it harder to avoid a repeat of the mayhem that followed the collapse of Lehman Brothers.

They point to likely inconsistencies in how banks will be treated under the rules that are being written, not only between European authorities in and outside the euro zone but also in jurisdictions further afield such as the United States.

Even if these problems can be overcome, regulators also fear clearing houses that will increasingly handle deals in the $630 trillion financial derivatives and swaps market could become a new generation of too-big-to-fail institutions.

The demise of Lehman Brothers investment bank in 2008 helped to accelerate the global crisis. Governments were forced to bail out a series of banks in the United States and Europe at huge cost to taxpayers, fearing that if such big lenders failed, they would drag the entire financial system down with them.

Read more: Reuters

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