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G20 leaders urged to consider controversial banking reforms

The Institute of International Finance has today issued a report suggesting that G20 leaders should look towards a formal regime to counteract potential banking failures in the future. The Institute believes that shareholders and creditors should bear as much if not more of the burden than taxpayers in individual countries. So what would this mean for the international arena?

While there is an understanding that investors need an exit route at any time of their choice there is also a feeling that in the event of a catastrophic banking failure, taxpayers should not be expected to take all of the financial strain. There is a hope that by holding investors and creditors potentially accountable more pressure will be placed upon the management of these financial institutions to operate "in a different manner".

We are on the verge of seeing a potentially enormous shift with regards to risk in the financial sector which could change the whole outlook for the future. Taking away the safety net of various taxpayers around the globe will make company directors and investors think again and bring about a whole new strategy. However, can regulators around the world potentially risk a catastrophic banking collapse?

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