In the absence of effective resolution regimes, public finances will be under more pressure, Bank of England Deputy Governor Paul Tucker said Monday.
The countries that resorted to bank bailout and without effective resolution system will possibly have higher government yield, policymaker said in a speech in Netherlands.
"Only with a credible mechanism to put losses to a failed bank's creditors can we harness the forces of market discipline and take tax payers off the hook," Tucker said.
He said, "only with powers and plans to resolve cross-border banking groups can we arrest the risk of national regulators progressively putting up barriers to cross-border finance."
The so-called "Bailin" rules will ensure that creditors suffer the loss on bank failure and recapitalize it, he added. Supervisors and resolution authorities need to agree a framework for graduated intervention as a firm deteriorates.
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