Federal Deposit Insurance Corp. Chairman Sheila Bair said the government should consider limiting payments to secured creditors of failed holding companies.

Speaking in Turkey, Bair said that if the government wins resolution powers of bank holding companies, a key part of regulatory reform, it could impose 80% haircuts on secured creditors when it winds down a large firm. Doing so would likely lead to better risk monitoring of financial firms and larger payments to unsecured creditors.

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