US and UK to run ‘too big to fail’ collapse simulation

[Natural Citizen]

US and UK to run ‘too big to fail’ collapse simulation

The US and UK will stage a comprehensive simulation next week check whether the countries’ financial and banking sectors are still vulnerable to the problem of the ‘too big to fail’ institutions and coordinate their actions in case of such collapse.

Government financial leaders from Britain and US will simulate a failure of a large banking institution on Monday in Washington, DC, to test the effectiveness of each county’s banking regulations.

“We are going to make sure we can handle an institution that was previously regarded as too big to fail,” said UK chancellor, John Osborne, speaking to journalists at an International Monetary Fund meeting in Washington on Friday. “This demonstrates the distance we have come over the last few years to build resilience and learn the lessons of the financial crisis.”

Participating in the “war game” along with Chancellor Osborne will be US Treasury secretary Jack Lew, head of the Federal Reserve, Janet Yellen, and the governor of the Bank of England, Mark Carney, with senior officials from both countries.

Continued - Bankocalypse drill: US and UK to run ‘too big to fail’ collapse simulation

 

[DFF]

Because of the amount of derivatives they have on their books, the failure of JPM, BOFA,Citigroup, Goldman, and probably Morgan Stanley, would most likely collapse the global financial system. As structured, they really are too big to fail....but since they have so much concentrated risk, they should all be broken up, to lessen the impact if one of them were to go under.

 

[Barrex]

It is probably just me but i think that could be romantic moment.

 

[surf]

I hate to date myself, but about 25 yrs ago I built a model for my large CU that covered all of this. it was part of a large push to bring asset/liability management into the decision process based on what happened during the S&L crisis of the early 80s.

of course, if i'd have incorporated a gov't bailout into my model we'd have had much larger risk positions we could have taken. I was taken back a bit (being viewed as too risk averse) when many brokerages as well as the credit union insurance guys - the same group that nearly went under in 2008 - made the argument that our deposits which re-priced monthly had a duration of 7 years.

in a nutshell, I just want to point out that these models and simulations are very easy to build and run if you're honest about the current position of the institutions balance sheet. there is no fucking excuse for getting where these guys are and being unprepared for whatever happens.

 

[anaconda]

When bureaucrats run "drills" I get nervous.