Bank bail-ins - FT.com To put it mildly, finding better ways to handle a Lehman-style collapse could not be more important. But after months of debate, proposals for a European regime to handle failures at big, systemically important banks have yet to progress. Legislation introducing a "bail-in" regime (under which the authorities could step in and force shareholders and bondholders to take losses) is still unpublished. Yet another delay was announced last month as countries differed over all-important details. So thoughts from the International Monetary Fund on the issue are timely. In a nutshell, its staff note (released on Tuesday) advocates early intervention, before a bank is actually balance-sheet insolvent. It also recommends allowing authorities to eliminate existing shareholders and impose haircuts on subordinated and unsecured senior debt according to normal liquidation priorities. The first is sensible, but carries the downside of more legal challenges. The IMF's solution is to minimise the role of courts - which is less attractive - although it does suggest limited judicial review to check the legality of bail-ins and appropriate damages. The latter is also reasonable, but unfortunately skims over nitty-gritty detail - for example, what unsecured debt should be exempt - perplexing Brussels. Most crucially, the IMF paper comes down in favour of requiring banks to hold a minimum amount of bail-in-able debt (as a share of total assets). In spite of squeals - from German banks in particular - that looks essential to prevent liabilities being shifted into other instruments and to reassure investors. And the paper rightly warns against pushing the new regime too fast (so increasing bank funding costs and compounding deleveraging). A "comprehensive" framework would be good, too. But when cross-border regimes are involved, that is where the problems start.