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* Top executives of failed banks to be fired on the spot
* Creditors to be told of losses within 48 hours
* New regime would have avoided taxpayer bailout of RBS (Adds detail, comment)
By Huw Jones
LONDON, Oct 23 (Reuters) - Top managers of a failed bankwould be replaced immediately and creditors told within two daysthe losses they will bear, the Bank of England said on Thursdayin its blueprint for avoiding taxpayer bailouts in futurefinancial crises.
This is the first time the British central bank has set outthe steps it would take over an initial 48-hour period to dealwith a collapsing bank.
The lender's top executive management would be fired on thespot and the bank's liabilities used to pay off losses andrecapitalise in a bid to restore confidence and avoid a run.
The new regime comes into effect in January 2015. Had itbeen in place in 2008 when Royal Bank of Scotland failed, taxpayers would not have had to funnel 45 billion pounds($72 billion) into the bank.
"This is a significant milestone in our resolution regime,"said Andrew Gracie, executive director of resolution at the BoE.
With this blueprint regulators and banks aren't leaving afailure to chance but are planning ahead so that, should ithappen, it will be orderly and everyone will be clear on thesequence of events and who will pay for it.
The Bank expects its regulatory early warning system to spota pending collapse much earlier than in the past so that by thetime it pulls the trigger on restructuring, it would have a teamof seasoned bankers waiting in the wings to run the firm.
Replacing top executives is seen as key to signalling afresh start for a bank and a way of emphasising that a failureof management does not go unpunished.
Banks already must have plans outlining how they wouldrecover from a market shock or how critical parts, such asdeposits and payments, would continue unaffected by a collapse.
The Bank of England would, at the end of a 48-hourresolution period -- which can be over a weekend or midweek --announce which of the bank's bonds will be frozen or cancelledto pay off losses and replenish capital, and which ones won't beaffected.
This public announcement is aimed at avoiding runs onstricken banks, though it will take several years before all thebanks under the BoE net have a stack of "bail-inable" bondsequivalent to 8 percent of their assets, as required under a newEuropean Union law that takes effect next January.
The taxpayer-funded rescue of RBS was equivalent to lessthan 8 percent of its assets.
The world's top lenders, which include Britain's HSBC and Barclays, will also be required to hold aform of "bail-inable" debt under global requirements due to beendorsed by the Group of 20 economies (G20) next month.
Richard Bussell, banking partner at law firm Linklaters,said the reforms will have significant implications forfinancial institutions by changing their access to equity anddebt funding, as well as being required to produce detailedrecovery plans on an entity and group basis.
"But how well this works in practice will be down to how theEuropean and national supervisors and resolution authoritiesacross the EU work together," Bussell said.
The BoE's first port of call for cash would always beshareholders and creditors, including senior bond holders whoescaped losses during the financial crisis when taxpayers had toshore up lenders in Europe.
If not enough cash can be raised from shareholders andcreditors, then the funds being garnered from the current levyon banks will be used, making the need to go cap in hand totaxpayers again only a remote possibility.(1 US dollar = 0.6250 British pound) (Reporting by Huw Jones; Editing by Andy Bruce and VincentBaby)
