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UPDATE 1-Canada: Bank "living will" idea gains G20 traction

Published 11/04/2009, 11:09 AM
Updated 11/04/2009, 11:17 AM

* Canada wants comprehensive approach on big banks

* "Living wills" would set plans for orderly wind-downs (Adds details)

OTTAWA, Nov 4 (Reuters) - The idea of a "living will" for large, systemically important banks is gaining traction in the G20 as a way to avoid future meltdowns in the financial system, a senior Canadian finance official said on Wednesday.

Finance ministers and central bankers from the Group of 20 rich and developing nations are expected to emerge from Nov 6-7 meetings in Scotland with a concrete plan for assessing each other's economic policies starting next year as they aim to rebalance global growth, the official said.

Finance Minister Jim Flaherty said on Wednesday that Canada wants global policymakers to take a comprehensive approach when deciding how to treat banks deemed "too big to fail" -- those institutions, like the former Lehman Brothers, that are so influential that their collapse would risk bringing down the entire financial system.

The finance official, who spoke on condition of anonymity, later said Canada hopes to discuss a range of ideas, including a proposal that large banks have a plan or "will", approved by regulators, that would lay out an orderly wind-down in case of a life-threatening event.

Other ideas on the table are some form of surcharge for systemically important banks, or more intense regulatory supervision, he said. (Reporting by Louise Egan; editing by Peter Galloway)

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