"This is a big test of the new bank resolution framework that has been introduced not only in the US but also in Europe and nearly everywhere," said Demetriades. In the framework, "investors bear the losses, the taxpayers do not bear losses and depositors are protected only to the extent that is possible (...) We don't know [what to expect] because it [the framework] has never been used in the US before, to the best of my knowledge. But now we're talking about the 16th largest bank in the US. It is systemic. So there is a fear of contagion. I've listened to [Treasury Secretary] Janet Yellen's statement yesterday, and it's clearly confirmed that they're trying to allay those contagion fears that this would spread to the system."
"Inevitably, investors would be nervous throughout the system because the question is whether other banks will follow. And I'm afraid no one can answer this question [of what is to come] at the minute. And it is clear that the American authorities are worried by their statement, they're trying to reassure the public. They are trying to reassure depositors that their deposits are safe. But they cannot reassure investors by the very nature of the new legislation. They cannot and they should not reassure investors because we live in the new world of bail in now. So investors should be bailed in, should take in losses from bank failures, taxpayers should be protected. But we have to wait and see in the next few days how things unravel," Demetriades concluded.