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Can Big Banks Fail Safely?

Can Big Banks Fail Safely?

by Starling Insights

Starling Insights Editorial Board

Aug 29, 2023


Global regulators have spent over a decade striving to establish a framework that would enable the failure of major banks without requiring government support. In light of recent bank failures, it is clear this goal has not been met, and some have begun to question whether it is even possible.

"It is shocking to me that after 15 years of costly reform efforts, we still couldn't resolve even a $200 billion bank like SVB without extraordinary government support," said Jonathan McKernan, a Republican member of the US Federal Deposit Insurance Corporation (FDIC). The Dodd-Frank Act, which the US passed in 2010, required large banks to create viable "living wills" for orderly bankruptcy without taxpayer money. However, the real-world utility of these plans in a crisis is in question.

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