Global regulators consider bank creditor "bail-in" proposal, says WSJ

The Wall Street Journal reports that the Financial Stability Board, a global group of finance ministers, regulators and central bankers, is planning to make a proposal to the G20 meeting in November which would establish a system of what it calls bank “bail-ins”. This would be a mechanism where governments could forcibly convert bank bonds into equity if a lender gets into trouble. The idea is that the use of creditor bail-ins would reduce the need for governments to bail out troubled banks.

However, the article quotes pundit Avinash Persaud as warning that creditor bail-ins would be no cure for contagion risk. He points out that governments might try to bail out banks to avoid the need for a bail-in, since a big creditor haircut would itself have systemic implications.