UK: Too-Big-To-Fail | Can It Be Tackled?

Despite the many years that have passed since the global financial crisis, its causes and consequences continue to demand attention from industry and policymakers alike.

At the heart of the crisis was the dilemma posed by banks which were held to be "too-big-to-fail" (TBTF). Their sheer size, complexity and inter-connectedness made the prospect of their failure too harmful to contemplate. As a consequence, when those banks got into trouble, governments around the world chose to come to their rescue with financial aid – or "bail-outs".

The post-crisis consensus was that the TBTF problem had to be eliminated. A regulatory agenda was set out by the Financial Stability Board (FSB) to make it possible for large banks to fail in an orderly and predictable way – what we now know as bank resolution. But even in 2016, questions remain around whether the world's largest banks are still too big, too complex or too interconnected to fail, and whether this is a problem that can in fact be tackled by the post-crisis regulatory framework in its current form.

Today, Deloitte is launching a global report: Tackling too big to fail: the resolvability challenge for banks. We argue that tackling TBTF is indeed within reach, but that much more work has to be done by both banks and resolution authorities before this can be achieved.

Resolution and the post-crisis response to TBTF

In the aftermath of the financial crisis, G20 leaders at meetings in London and Pittsburgh in 2009 tasked the FSB with ending the TBTF problem. Its efforts to do so are characterised by two overarching workstreams:

  1. To make bank failures less likely: by increasing capital and liquidity standards for banks and other measures aimed at reducing risk in the banking sector.
  2. To make bank failures more manageable if and when they happen: by creating recovery and resolution regimes in each jurisdiction and resolution authorities to administer them that would step in to make the failure of a bank orderly and predictable, attributing losses to the bank's creditors and shareholders rather than taxpayers.

The second initiative – essentially one aimed at making the failure of a large bank possible without destabilising financial markets and, ultimately, the real economy – represents the core of the international community's push to end TBTF. This initiative is also one that is just starting to prove itself now (with the EU's resolution regime coming fully into force at the beginning of this year).

The drive to make banks resolvable

No one, however, wants to wait until the next failure of a major bank to assess whether or not the goal of resolvability has been attained. Resolution authorities must therefore determine ahead of time whether the banks within their remit are "resolvable" – meaning whether they could be resolved in a crisis without causing significant disruption.

Where those authorities find impediments to the resolvability of a bank, they have broad powers to remove them, if need be through forcing sweeping changes to a bank's business model, legal structure, strategy and activities.

This creates a significant challenge for banks. Becoming resolvable in the eyes of authorities is a post-crisis imperative – but how can banks achieve this? The resolvability standards set out by the FSB set some markers for evaluation, but interpreting these criteria in detail is difficult, and something on which the opinion (and risk appetite) of banks and the authorities they answer to may differ considerably. If authorities take a strict line – as those in the United States have already shown an appetite for – the operational, financial and structural transformation demanded of banks will be significant and costly.

The six resolvability drivers

In our report we have identified the six areas below as drivers of a bank's resolvability. Progress against each of them is essential to ensure that a bank can effectively transform itself into an institution that is manageable and flexible enough to be resolved in an orderly way. For each driver, we set out some of the most challenging aspects of the authorities' expectations, but also discuss a number of solutions and leading practices that we have observed.

These are also areas where we believe resolution authorities need to give much clearer guidance to banks, either individually or generally, in terms of what they expect of them, and when they will expect to see it. This kind of clarity can facilitate the planning and investment that banks will need to undertake in order to reach these goals.

There should be no mistake that implementing the solutions necessary to become resolvable will be costly, time consuming and operationally complex. That said, we believe that the banks that manage this most successfully will be those that find ways to harness synergies between their resolvability-driven transformations and efforts they would pursue in any case to improve their efficiency and competitiveness. If done well, resolvability can be used as an opportunity for banks to become leaner, more manageable and cost-effective entities that are better positioned to thrive in post-crisis market conditions.

The need to take action now

Taking a step back to look at the bigger picture, some have recently questioned the effectiveness of the post-crisis framework in ending TBTF, and whether the failure of banks carries just as much systemic risk today as it did in 2008. They go on to ask whether much stronger measures should therefore be taken, including limiting overall bank size or imposing capital requirements far surpassing those set out in the Basel framework.

Against this background both the private and public sector have a strong shared interest in demonstrating the effectiveness of the current rules. To do so, they still have much to do and need to work more closely together to develop a clear understanding of what banks can and should achieve. A successful drive to make the banking sector more resolvable should demonstrate to stakeholders that the post-crisis regulatory framework is indeed fit for purpose, and has credibly tackled the TBTF problem.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.