Still Too Big to Fail?

After a decade of reforms aimed at ensuring no bank is too-big-to-fail, the collapse of Credit Suisse served as the first real-life test of this framework. A resolution following the international and Swiss too-big-to-fail framework would have involved recapitalizing Credit Suisse by bailing in all loss-absorbing capital. Instead, Swiss authorities opted for a state supported acquisition of Credit Suisse by UBS. This raised concerns about the applicability of the entire too-big-to-fail regime, leading some observers to dismiss it entirely. In the ongoing discussion on the regulatory implications of this near miss, a series of reports have made numerous recommendations. This paper argues that the focus should be on necessary reforms to ensure that taxpayers do not bear the risk of GSIB failure. Reforms should enhance the robustness and credibility of the bail-in resolution regime. At a minimum, this means ensuring cross-border legal certainty of bail-in, securing funding in resolution, and expanding resolution options. Additionally, a proposed special recovery regime for GSIBs should mandate early supervisory intervention, ensure timely restructuring, and provide adequate capitalization.