The Bank of England’s deputy governor has called for capital rules to be bolstered with a global accord that would force lenders to hold bonds to cover loss in case they go bust.
Paul Tucker said the latest set of rules being phased in, known as Basel III, would help keep a bank in business. But he wants to enforce a further, minimum level of debt could be used to absorb losses if a bank went bust.
The bonds would convert into equity for winding down a troubled bank without the need for taxpayer money, he argued. Such rules would spell out different phases of a bank’s “life and death”.