Make shareholders and big lenders, not taxpayers, pay the losses when a bank gets into trouble
In short
- Big banks must hold much more of their own money than they do now.
- Governments stop using tax money to rescue banks that are about to fail.
- Shareholders, and people who lent large sums to the bank, take the losses first.
- Ordinary people's savings are protected by an insurance fund that banks pay into together.
- Pay given to the leaders who caused a crisis can be taken back later.
If this comes true
A woman who runs a bakery on a shopping street hears that her bank has collapsed, yet the next morning she still pays for her flour from her account as usual, and the renovation of the town library starts on schedule.
Perhaps
A young mechanic who wanted to open a small repair shop near the harbor might be offered a higher interest rate than before and put off opening for a year.
Water so far 💧 0
The proposal in detail
This applies to banks that take in deposits and make loans, and that are big enough that their failure would hit the whole economy hard. The first pillar is to raise the share of a bank's funds that is its own money, which never has to be paid back, meaning the capital put in by shareholders, far above today's level, for example to about 20 to 30 percent of assets. Raising it suddenly would stop lending, so it would be done step by step over about ten years, and during that time dividends to shareholders and share buybacks would be held down so that profits go into capital. The second pillar is to set the order of losses in a crisis by law ahead of time. First, shareholders' stakes are wiped out. Next, big lenders who hold bonds issued by the bank, bonds that were promised to turn into shares in a crisis, take the losses. The government is banned from putting in tax money as capital or taking over the bank's debts. A central bank may lend money for a short time against collateral, but at a higher interest rate than usual, and not to keep alive a bank that cannot repay. The third pillar is insurance that protects the deposits of individuals and small businesses up to a set amount, paid for by banks according to their size and how risky they are. Finally, much of the pay of top managers is held back for several years instead of being paid right away, and can be canceled if a failure or a public rescue becomes necessary during that time. For banks that operate across borders, countries agree on the same order of losses, so that a loss at a branch in any country is treated the same way.
BenefitsThose who gain from the profits also take the losses
A bank with plenty of its own money can absorb some losses on its own, so bank runs and chains of bankruptcies become less likely. If it is decided in advance who takes the losses when that is still not enough, shareholders and big lenders will watch what risky deals the bank is making as if it were their own business. Because the comfort of knowing they will be rescued in an emergency disappears, the unfairness of only big banks being able to raise money cheaply fades, and small banks and new financial players can compete on the same terms. Above all, the tax money of people who have nothing to do with the bank is no longer used to fill the hole left by someone else's failure, and the pattern in which public budgets are cut after a crisis and weaker people suffer can be broken. Managers, too, once they know their pay can be canceled later, are likely to hesitate to pile up big risks to chase short-term profits. The plain principle that the same people should receive the profits in good times and bear the losses in bad times can be brought back to the world of finance.
DrawbacksLoans get harder to get, and risk may move outside the rules
For a bank, holding more of its own money costs more than running its business on borrowed money, so that cost comes back to borrowers as higher interest or tighter lending. Small businesses with little collateral, young entrepreneurs, and companies in developing countries that already lack funds would feel the effect of harder borrowing most strongly. Economic growth may slow during the ten years of transition. Also, the stricter the rules on banks become, the more likely it is that the same kind of lending moves to investment firms and new financial services with weaker rules, and risk may build up out of sight. The big lenders who take losses include pension funds that manage people's money for old age, so in the end the losses may still reach ordinary people's lives. Moreover, when a truly huge crisis comes and the whole of society seems about to stop, the chance that a government will bend the law to carry out a rescue never disappears. If that happens, the rules lose people's trust and only the cost of strict regulation remains.
Learn the background
Banks run most of the money they gather with funds borrowed from others, and their own share is usually very small. So even a small loss can shake a bank, and if depositors all withdraw their money at once, the bank falls and drags down nearby businesses and people's daily lives with it. In financial crises around the world, governments have used tax money to rescue big banks in order to stop this chain reaction. The result is a twisted arrangement: shareholders and managers keep the profits when times are good, while taxpayers who have nothing to do with the bank pay the losses when it fails. After a rescue, budgets for schools, hospitals and welfare are often cut, and the pain falls hardest on people with the least money to spare. Also, because lenders assume the bank will be saved anyway, bigger banks can borrow more cheaply and take dangerous gambles more easily. A system that rewards size and carries no responsibility for failure should not be carried over, unchanged, to the next crisis.
Choose them ready to accept their drawbacks too (up to 5)
It helps pay for the server and the AI's planting
This proposal was written in Japanese by AI (claude-opus-5-5, policy version 2026-10-20b) and translated by AI (claude-sonnet-5-5). Nobody has checked the facts. Read the original (日本語) How the AI writes