JUST 51 hours separate the closing of the New York Stock Exchange on Friday afternoon from the opening of the Tokyo bourse the following Monday. How bankers wish it were longer.

Regulators want it to be possible for any bank to fail without causing chaos or taking a bail-out from taxpayers. To that end, they are demanding that big financial firms draw up plans that would make it easier to dismember them or start winding them down during the brief weekly hiatus in trading.

That is proving tricky. This week the Federal Deposit Insurance Corporation (FDIC), the American regulator that takes charge of failing banks, rejected the “living wills” of the local subsidiaries of three of the world’s biggest banks: BNP Paribas, HSBC and RBS. Last year it declared inadequate the plans of all 11 of the banks with more than $250 billion in assets in America, including Bank of America, Barclays, Citigroup, Credit Suisse, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS. The second lot have until July 1st to revise their submissions; the first three until the end of the year. If any of the revised plans are rejected, regulators will gain extraordinary powers to stem the growth of the banks in question or break them up.   

The basic problem is that big banks’ operations are too complicated for a quick and easy dismemberment. The FDIC and other “resolution authorities” (Europe’s new one held its first meeting this week) are forcing them to become much simpler. The aim is to make a bank failure akin to that of any other firm in the economy: painful for investors, potentially troubling for staff and suppliers, but far less noteworthy for customers and the wider world.

Regulators want choices they didn’t have during the financial crisis, when nudging a financial firm into bankruptcy was thought likely to unleash pandemonium—a conjecture confirmed when Lehman Brothers foundered in 2008. Since then, many governments have given resolution authorities the power to take over a faltering bank well before the cash runs out.

They will be allowed to run their charges much like an administrator does an insolvent company.

Regulators also intend to impose losses from a bank failure not only on shareholders, but on bondholders too. That would be an improvement on the financial crisis, when bondholders were largely spared for fear of exacerbating the credit crunch. A large part of the money banks use to fund themselves now has to be in the form of “bail-inable” debt, (some of) which is intended to be written off if a bank is close to failure, not just if it is bust. In theory, a regulator would be able to impose enough losses on shareholders and creditors to stabilise a bank over that brief first weekend without troubling depositors or taxpayers. The resolution authority would then have a few months to make decisions on whether to wind down the bank or allow parts of it to keep going.

For all this to work, regulators think banks need to change. Ideally, they would like each operating unit to be able to function independently, with its own dedicated funding and capital.

The watchdogs also want banks to be simpler. They are not keen on rococo corporate structures (cross-shareholdings between units based in assorted offshore jurisdictions, say) which mere mortals can scarcely understand, let alone disentangle in a crisis. “Too complex to resolve” is the new “too big to fail”.

Banks must codify what were once informal relationships between different units. Critical but dull support services—the IT helpdesk, say, or the property-management division that holds the lease on the bank’s head office—must have clear service contracts with other bits of the bank, in case they get sundered in a break-up. Another form of simplification is the agreement 18 global banks struck last October promising not to pull out of derivative contracts abruptly if one them hits the buffers.

American regulators also want banks to be able to go through full-blown bankruptcy without needing to borrow from the Federal Reserve—a Herculean task, given depositors’ and creditors’ tendency to flee troubled banks. So far, Wells Fargo is the only big American bank that the FDIC judges capable of that. It is helped by a comparatively simple corporate structure: its foreign operations are small, and it does hardly any investment banking.

Some bankers concede that drafting living wills has helped them rationalise their businesses by weeding out “junk DNA” in the form of defunct subsidiaries tied to forgotten deals. Others dismiss the exercise, which for many has involved submitting over 10,000 pages of documents, as another pointless regulatory burden. “Our plan says: fire anyone who knows anything about running the firm, sell everything, get smaller,” one gripes.

Asking for each unit to be self-sufficient is pushing towards a less streamlined financial system, bankers complain. “What used to be informal lending between two subsidiaries is now a strict revolving facility,” says the boss of a global bank. This not only adds to administrative costs, but also makes it hard to put capital to the most profitable use. “It stops the easy flow of money across operations,” says the head of regulation at another banking giant. All this will eventually translate into higher costs for customers.

“If banks cannot die in the market, the pressure on regulators will be to make them simpler and smaller,” says Thomas Huertas, a former regulator now at EY, an advisory firm. However, if regulators can be made confident their charges are safe to fail, they might ease up on the red tape.

One senior official speaks of a “pivot” away from ever more regulation once resolution is a credible option for banks.

In the meantime, the regulators themselves have work to do. In Britain and America, both global financial hubs, supervisors have run “war games” to simulate their resolution strategies in a crisis.

But winding down a bank in practice is bound to be much tougher. One pressing question is how much international co-operation there would be. During the crisis, national regulators scrambled to protect “their” bit of global banks, to the detriment of others. Watchdogs have agreed to work together next time. Few expect they will.