Top US and British regulators will carry out their first war games today to test how they would handle another Lehman Brothers-style banking crisis.
The exercise will involve Federal Reserve chair Janet Yellen, Bank of England governor Mark Carney and UK Chancellor of the Exchequer George Osborne in Washington.
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The war game will not be based on any specific institution. The authorities will run through the procedures they would follow if a large UK lender with US operations failed and those for a significant US bank with a British presence.
The exercise will test the new strategy developed by global regulators in the past six years to handle the collapse of megabanks without the taxpayer bailouts and market tumult that characterized the 2008 crisis.
Osborne said: "We are going to make sure that we can handle an institution that previously would have been regarded as too big to fail. We’re confident that we now have choices that did not exist in the past.
"London is a global financial centre, and is both home and host to some of the world’s biggest and most important banks. This brings with it many opportunities for jobs and growth, but we need to make sure that taxpayers are not on the hook for future bank failures."
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By GlobalDataThe FSB maintains a list of global systemically important banks. The latest list included 29 banks and identified HSBC Holdings and JPMorgan Chase as the banks whose failure would do the most damage to the global economy.
