WASHINGTON (The Deal) -- Former Federal Reserve Chairman Paul Volcker on Wednesday said he is optimistic that international bank supervisors will be able to strike agreements on complex cross-border issues that exist when setting up a global system to dismantle a big failing international bank.
"I am optimistic," Volcker told The Deal after speaking at an event at the World Bank in Washington. "It is a big complicated subject but I'm amazed at how much progress is being made. If you get Europe, which is worrying about it, and you certainly will get the US and U.K -- which are close together -- you've pretty much got it."
Volcker's comments come after critics have poked holes in plans for the new system, which is being set up as an alternative to bankruptcy. The aim is to avoid the complex international chaos that followed Lehman Bros.' historic Chapter 11 filing in September 2008 by dismantling a failing global bank in a way that does not wreak havoc on global markets. The Dodd-Frank Act, written in the U.S. after the 2008 financial crisis, required that regulators create a so-called Orderly Liquidation Authority. U.S. regulators are working to set up the OLA and they have been meeting regularly with their international counterparts to make sure it jibes with similar systems being set up in other countries.
Critics of the system being set up say it has too many loose ends. They assert that even if the OLA is used to dismantle a large institution in the U.S., the bank still will be tied up in bankruptcy regimes in other jurisdictions. However, Volcker said he was optimistic about the international effort. He noted that in addition to the U.S. and Europe another key constituent is Japan, which he told The Deal "isn't much of a problem because they are not that complicated."