How bail-in was born

Author: Tom Young | Published: 2 Mar 2015

No one who was there will forget it. All those present in the offices of the Federal Reserve Bank of New York during the infamous weekend in September 2008, when Lehman Brothers went bankrupt, will find it hard to shake the memory, as policy makers and Wall Street's most senior bankers tried, ultimately unsuccessfully, to avoid a devastating collapse. One man found it harder to forget than others though.

Wilson Ervin, at the time Credit Suisse's chief risk officer (he is now vice chairman in the bank's executive office) was determined to prevent another such crash. He was adamant there had to be something better than a destructive collapse or another taxpayer bail-out. Along with other executives at Credit Suisse, he went about trying to crack the problem, and invented a new approach called bail-in. It has evolved from a novel suggestion into a global policy initiative driven by the...