BEYOND BANKORP
Bank has a tried-and-tested model for dealing with financial blowouts
SA’s central bankers have used caution and innovation to create a system that handles and avoids meltdowns, writes Hilary Joffe
If Bankorp still existed, it would probably be classed as a "systemically important financial institution" under the new global and local rules on banks that are deemed too big to fail. It would have to have a "living will" in place detailing a resolution plan if it gets into severe distress, and its finances would be structured to ensure its shareholders and bondholders would take the pain, while depositors would be protected. If it did have to be rescued, regulators might look to its competitors to help, on the grounds that it would be in everyone’s interests to protect the whole financial system from the contagion of a big bank failure. It’s all there in comprehensive new frameworks, global and local, on how to prevent financial institutions getting into distress and how to minimise the damage to the economy and cost to taxpayers if they fail. The policy makers, regulators and bankers who have spent thousands of hours since the global financial crisis working to ensure that SA ha...
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