IMF calls for new body to save taxpayers from burden of failing banks

http://www.guardian.co.uk/business/2010/mar/19/imf-save-taxpayers-failing-banks


Dominique Strauss-Kahn of IMF says new body would force shareholders and creditors to bear costs of bank failure


The International Monetary Fund has called for a European "fire brigade" funded by the finance industry to deal with the collapse of banks that operate in several countries.

Managing director Dominique Strauss-Kahn urged the European Union to create a European resolution authority to deal with insolvent banks that would force shareholders and uninsured creditors – rather than taxpayers –to bear the costs of failure. The authority would be funded by the financial industry from deposit insurance fees and levies on institutions, he said.

"What I think is needed is a European resolution authority, armed with the mandate and the tools to deal cost-effectively with failing cross-border banks – an ex-ante [before the event] solution to the problems that currently hamper co-operation in crisis situations, rather than an ex-post one," Strauss-Kahn told a conference in Brussels today.

"It should cover at least the major cross-border banking groups, as well as all banks running large-scale cross-border operations under the single passport."

It sound all good until I read this
That government burden sharing is more taxpayer funding

The system would need access to a fiscal back-up mechanism, he said, with a mechanism of burden-sharing between governments.