BIS central bankers’ speeches  will be moveable in a stress to where it is needed rather than needing to be prepositioned in case stress arises. Resolution is also supported by additional total loss absorbing capacity (TLAC) requirements on firms to absorb losses and recapitalise as needed in the event of a resolution. The balkanisation that was the initial response of regulators to the crisis supports locally-led, uncoordinated resolution. Strong local requirements are in place to ensure multiple local resolutions of failed entities. However, this is likely to be a suboptimal outcome for all concerned. Local entities and the critical functions they provide may not in reality be able to survive resolution separated from their parent. Furthermore, uncoordinated actions by authorities increase the risk of “asset grabs” and a general need for more resources across the group as a whole. Coordinated resolution, and for highly integrated groups an SPE strategy, can better support international banking and international capital flows. With coordinated resolution, the need for regulatory balkanisation can be reduced, with host supervisors reassured by an internal TLAC requirement that transforms debt into equity and so ensures capital resources can be downstreamed from the parent group in a stress when needed, rather than pre-positioned “just in case”. Let me return now to the key lesson we took as host supervisors from the crisis – that of our greater appreciation of the connectivity between the entities we supervise and their parent groups. This is present in franchises and business models, in financial exposures and in operational support.

To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that an ample degree of monetary accommodation is still necessary for the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term. 2/3  BIS central bankers' speeches  In order to reap the full benefits from our monetary policy measures, other policy areas must contribute more decisively to raising the longer-term growth potential and reducing vulnerabilities. The implementation of structural reforms in euro area countries needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential. This is particularly important in view of the overall limited implementation of the 2018 country-specific recommendations, as recently communicated by the European Commission. Regarding fiscal policies, the mildly expansionary euro area fiscal stance and the operation of automatic stabilisers are providing support to economic activity. At the same time, countries where government debt is high need to continue rebuilding fiscal buffers. All countries should continue to increase efforts to achieve a more growth-friendly composition of public finances. Likewise, the transparent and consistent implementation of the European Union’s fiscal and economic governance framework over time and across countries remains essential to bolster the resilience of the euro area economy. Improving the functioning of Economic and Monetary Union remains a priority.