MPs to investigate continuation of 'too big to fail'

It aims to ensure that banks judged 'too big to fail' could be recapitalised if necessary without recourse to taxpayer funding and that the rules and institutions created to achieve this aim are working, or will work, properly.

In a call for written submissions, the Treasury asks what progress major UK banking groups have made in developing realistic and effective resolution and recovery plans, including ring-fence arrangements, and what key uncertainties remain.

It will explore whether there are any differences in the way recovery and resolution regimes are being implemented in other countries that have significant implications for the UK financial system.

The Committee will also investigate what impact Brexit could have on the effectiveness of the UK’s recovery and resolution regime.

It has raised concerns that Brexit could affect the management of cross-border resolution for banks that have operations in both the UK and EU.

Andrew Tyrie, Chairman of the Treasury Committee, said: "The public was forced to foot the bill – and a large one - when the banks got into trouble during the crisis. They are still footing the bill now, with the profitable disposal of RBS looking like an ever more distant prospect.

"Eight years on from the crisis, a great deal of effort has gone into ending 'too big to fail'.

"It is vital this problem be solved. As the Parliamentary Commission on Banking Standards concluded, the assumption that failing banks would receive public support was part of a toxic cocktail of misaligned incentives which contributed to the financial crisis.

"The public have a right to know whether they are now adequately protected. Ring-fencing and resolution regimes are intended to ensure that the failure of large banks can be managed in an orderly way, without relying on public support. It is vital to establish how robust they now are.

"The Committee will examine what progress has been made and whether the regulators are getting it right. Interested parties are invited to address any or all of the relevant questions."