UK and US to play out a financial “war game” after IMF meeting

By: Mike Paterson

The Telegraph reports that a financial crash to rival the one caused by Lehman Brothers' collapse will be played out  next week, in a “war game” designed to help end the “too big to fail” problem. In the first simulation of its kind, Janet Yellen, and Mark Carney will be joined by UK Chancellor George Osborne and US Treasury Secretary Jack Lew, who will be tested on their reaction to a major US or UK bank failure. The exercise, designed by regulators on both sides of the Atlantic, forms part of a series of measures designed to end the phenomenon of “too big to fail”, limit the risks to financial stability and protect taxpayers from future bailouts. Osborne said the exercise, which will take place in Washington after the IMF's annual meeting currently in progress, will examine the failure of a big Wall Street bank with UK operations, and that of a major UK bank with a division in the US. We're going to make sure that we handle an institution that would have previously been regarded as 'too big to fail'.We're confident that we now have choices that did not exist in the past, so we don’t have to choose between bailing a bank out and letting it collapse. I think this demonstrates the distance that we've come in the last few years, to build resilience, to learn the lessons of the financial crisis, to make sure we are better prepared for whatever the world throws at us in the future. The initial findings of the simulation will be published next week, and will form one of the cornerstones of G20 proposals to strengthen the financial system that Carney, who is also head of the Financial Stability Board, is expected to present in Australia next month The Telegraph has more here Practice makes perfect they say.