For the public, the most distasteful aspect of the Global Financial Crisis was that tax payers around the world had to foot the bill for shoring-up financial institutions that had gambled big and lost. These banks and investment houses were thought to be too big to be allowed to go to the wall since such bankruptcies could threaten the very existence of the global financial network.
To ensure that such a situation never arises again (meaning that if a bank finds itself in that much trouble, it will simply cease trading and its shareholders will take the hit), the global regulator for the sector, the Financial Stability Board (FSB) is insisting that banks hold more (of their own) money on their books to cover potential losses.
The Governor of the Bank of England, Mark Carney, is chair of FSB. In an interview with the BBC, he described the changes as a “watershed” moment. "The banks and their shareholders and their creditors got the benefit when things went well, but when they went wrong the British public and subsequent generations picked up the bill - and that's going to end. Instead of having the public, governments, the taxpayer rescue banks when things go wrong; the creditors of banks, the big institutions that hold the banks' debt - not the depositors - will become the new shareholders of banks if banks make mistakes. Let's face it, the system we've had up until now has been totally unfair." Few will argue with that.
At the peak of the crisis (2007-08), the UK’s National Audit Office stated that the UK taxpayer was underwriting over £1 trillion of debt (taking on an effective position of lender of last resort). And governments around the world injected hundreds of billions of pounds of public money to ensure that key banks remained solvent.
The FSB is requiring banks to set aside between 15 and 20% of their assets to protect against a future crisis, considerably more than was required before the crisis.