New tremors in high finance rattle foundation of post-crisis regulations

New York

GOVERNMENTS around the world have built over the last few years a vast new system of rules that would allow banking giants to fail and shield taxpayers from bailouts.

Though this new regulatory architecture is eye-numbingly complex, its builders contend that it has made the financial system much safer without having to resort to measures like forcing a breakup of the largest banks.

But that reassuring view has taken a beating of late.

Recent turmoil in European debt markets pointed to a possible weakness in a crucial part of the new regulatory system. Shares of large banks have been under pressure, tradin…