ABSTRACT
Chapter 5 covers two reform initiatives designed to ensure no financial institution is too-big-to-fail (TBTF) any longer. It shows how the Basel Committee, a government network, succeeded in finding global consensus on a definition of systemic risk and unprecedented policy measures to address it. The rapid advances in identifying systemically important financial institutions and subjecting them to higher loss absorbency requirements contrast with a second bundle of policy measures: bank resolution. Even though the Financial Stability Board forcefully promotes global cooperation to facilitate the orderly wind down of global banks, reform progress in this area is lagging behind. Again, this hypothesis is tested against competing explanations. The chapter also covers a more recent initiative to end TBTF by developing a new global loss absorbency standard (TLAC) for failing banks. It shows how the Financial Stability Board imitated the institutional pathways of policymaking in the Basel Committee to make its loss absorbency standards effective.
