It's the Holy Grail of financial regulation: allowing a big bank to fail without wrecking economic growth or squeezing taxpayers to rescue it.

For regulators and politicians on both sides of the Atlantic, it remains as elusive as ever.

Eight years after the financial crisis showed how destructive a series of bank failures and state bailouts can be to both the world economy and public morale, the global financial system remains vulnerable to the collapse of a big multinational bank.

In the U.S., five of the largest banks have failed to convince regulators that they would not need to be rescued by public funds if they had to be unwound by a bankruptcy judge. Regulators have told the five, which include JPMorgan Chase, Bank of America and Wells Fargo, to come back with better plans by October.

In Europe, governments have had serious problems dealing with small, local banks such as Italy's Monte dei Paschi di Siena, let alone international behemoths that could end up in trouble. These include Deutsche Bank, recently tagged as the world’s riskiest financial institution by the International Monetary Fund.

Last week's European stress tests failed to clear the clouds hovering over Europe's banks by showing that big lenders such as Deutsche, Commerzbank, Barclays and Unicredit would struggle in a prolonged economic downturn. And investors' reaction on Tuesday, with shares in many banks tumbling, suggests that the exercise has compounded, rather than dispelled, the market's fears about the health of EU lenders.

The stakes are so high because of the unique way banks interact with the economy. As the custodians of a nation's wealth in the form of deposits and the main conduits for the distribution of money from savers to businesses, consumers and even governments, financial groups are no ordinary companies.

If a supermarket chain or a manufacturer fails, the principal victims are its shareholders, creditors, employees, customers and suppliers. But as the collapse of Lehman Brothers in September 2008 showed, when a big bank collapses economies can grind to a halt, stock markets plummet and, ultimately, taxpayers are forced to foot the bill, with all the attendant political fallout.

As Sir Paul Tucker, the former deputy governor of the Bank of England, puts it, finance is "a peculiar form of asymmetrically socialized capitalism."

In other words, when a bank succeeds, a few people win big; when it fails, we are all losers.

#EndingTBTF

It wasn't supposed to be this way. The regulatory onslaught that followed the 2008 crisis had one big target: ending "Too Big to Fail," the popular shorthand for large banks' (and insurers') ability to hold governments to ransom by threatening to bring down entire economies with them.

Among the measures aimed at achieving that goal were the 2010 Dodd-Frank law in the U.S., higher capital requirements decreed by the powerful Basel Committee, and the overhaul of EU banking regulation that culminated in the creation of the Single Resolution Board. These measures were intended to erase the acronym most politicians, regulators, and even many bankers, love to hate: TBTF.

To no avail. "Large banks currently remain TBTF," Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, told a regulatory symposium in June. "If a large bank ran into trouble today, it would still need a taxpayer bailout because the implementation of the new regulations remains incomplete," added Kashkari, who worked in senior roles at Goldman Sachs and then at the U.S. Treasury during the crisis.

Perhaps to underline the popular appeal of his crusade, Kashkari even coined a Twitter hashtag: #EndingTBTF.

Kashkari’s view on big banks — he has suggested that they might need to be broken up —is almost universally hated by industry executives and controversial even among fellow regulators.

For many regulators in Brussels, Washington, London and Frankfurt, the more appropriate Twitter hashtag should be: #EndedTBTF. That was the message Martin Gruenberg, chairman of the U.S. Federal Deposit Insurance Corp., delivered at a financial conference in Amsterdam in April.

"In my view, we are at a point today that if a systemically important financial institution in the United States were to experience severe distress, it would be resolved in an orderly way," Gruenberg said.

His remarks were barely covered in the mainstream press but sent a frisson of excitement through the financial industry. For banking executives, hearing such words from the head of one of the two U.S. agencies charged, alongside the Federal Reserve, with "resolving" a failing bank, was a sign that the wave of rules unleashed by the 2008 crisis were coming to an end.

Gruenberg "does not shout from the rooftops, but he is a serious guy and has worked hard on this, and that is why this is important," said one executive, who spoke on the condition of anonymity.

In Europe, regulators have been equally eager to close this painful chapter of financial history. Andrew Gracie, the senior Bank of England official in charge of this issue, told a conference in May: "We have come a long way to making [big bank] resolution feasible and credible, and with implementation of the measures already agreed, and the tying of loose ends, the task will be complete."

When POLITICO asked Elke König, the head of the Single Resolution Board, whether her young agency was capable of fulfilling its duty of burying a bank without killing the economy, she said: "The answer to that question is of course, yes." She added, "I am very confident that if a bank is failing we have now the rules in place, we have the tools at hand to get this sorted out."

Others fear that these pronouncements are the triumph of hope over experience.

Robert Jenkins, a former senior banker who is now senior fellow at the pro-reform group Better Markets, points to a glaring weakness of the current system: Finance is global while regulation remains largely local. Unless Europe and the U.S., and other jurisdictions, can agree on rules to wind down international groups, problems will persist.

"TBTF has not been solved. An agreed cross-border resolution regime is not in place and loss-absorbing capital levels remain too thin for regulators to pull the trigger," Jenkins said.

Nowhere near normal

Tucker, who now heads the Systemic Risk Council, a U.S. regulatory advocacy group, is also working on a very different timetable from Gruenberg and König.

"We are a third of the way through the period of adjustment. In other words, I think it will take the best part of a quarter century to find our way back to a sustainable steady state," he told a Brussels conference in June. "Especially here in Europe, we are no way near close to even beginning the path back to ‘normal.’”

How to get there? Opinions abound. Kashkari's view is that big banks should be broken up through a new version of the Glass-Steagall Act, the Depression-era U.S. law that separated the functions of commercial and investment banks. That option has found some bipartisan favor in the U.S., from former Democratic presidential contender Bernie Sanders to some members of the Republican Party.

Senior figures like former Fed chairman Ben Bernanke, and, in more coded language, his successor Janet Yellen, have rejected such draconian measures. Bernanke argues that the current rules will naturally force banks to shrink and be less risky without the need for "arbitrary limits on assets." As he has noted, Lehman was about a third the size of the biggest banks when it collapsed.

Tucker's solution is to keep the whole process away from those who draw their power from the public.

"Politicians inevitably delay until almost the last possible moment before bailing out firms because it is deeply, deeply unpopular," he told the Brussels conference organized by Finance Watch. "Its unpopularity outlives the relief at the world being saved. And it is unpopular for good reasons. It is unfair. And it makes the world riskier because financiers can expect to get rich during the good times without sharing the disciplines of the market during the bad times."

Better, in his view, to ask independent regulators to enforce strict rules. Rules like the EU's Bank Recovery and Resolution Directive (BRRD), which imposes tough losses on creditors of failing banks, or the Orderly Liquidation Authority, the Dodd-Frank provision that enables regulators to wind down a failing bank.

But recent experience suggests that no rule is immune from politicians' long tentacles. In the case of the BRRD, the Italian government spent a long time trying to get around its provisions as it negotiated a rescue of Monte dei Paschi. And some Republicans in the U.S. Congress want to do away with OLA, raising questions about whether a Trump administration would be willing to invoke it during a crisis.

Yet one senior European banker argued that politics should be an integral part of any decision to save a troubled lender.

"TBTF is a red herring and nobody knows how to really solve the problem," he said, speaking anonymously because he didn't want to antagonize regulators with his comments. "Letting a bank fail doesn't only create financial problems but also political ones. In a system like the European one, where 80 percent of funding to the economy comes from banks, the idea that you can eliminate TBTF is not realistic. And thinking that there is no role for public finance in ensuring the stability of the banking system is absurd."

The quest for finance's Holy Grail continues.

Zachary Warmbrodt contributed to this article.

Clarification: An earlier version too narrowly characterized Neel Kashkari’s position on how to address Too Big To Fail. Kashkari has suggested that they might need to be broken up as one of several options.