That discussion is intended to be on a firm-by-firm basis among the supervisors and resolution authorities in the principal locations of the firm's activities. The CBRG recommendations provide useful building blocks toward a stronger crossjurisdiction national process: resolution tools, national coordination across jurisdictions, recovery planning, setting aside of impediments to recovery and resolution and simplification of organizational complexity. The CBRG also recommends that national authorities seek international convergence of resolution tools and measures. How might we envision an effective cross-border resolution process developing from these building blocks? The report is very careful in talking about how the building blocks might integrate at the international level, noting the many problems and conflicts faced by national authorities in dealing with a troubled or insolvent organization located partially outside national borders. So let me extrapolate from the report, expressing strictly my own views and sketch out how the process set in train by the CBRG recommendations might evolve. Let’s focus on a single systemically important financial institution. The healthy dialogue among regulators and resolution authorities in the principal jurisdictions for a given firm and the firm-specific recovery and resolution plans developed could provide the basis for strong cooperation when the institution crosses from healthy to troubled. On the basis of that cooperation, the lead supervisor, with the participation of the resolution authority in the home country jurisdiction, could coordinate a program of early supervisory intervention encouraging a private restructuring utilizing the recovery plan.

I will conclude by returning to my starting point, to the importance and the scarcity of time in dealing with a troubled financial firm. The important role time plays at a failing firm The seeds of any financial failure are generally planted years earlier. The cycle is familiar to us all – in good times, most business strategies thrive. Financial institutions commence an  BIS Review 140/2010  1  activity that has high initial marginal returns; over time the activity attracts more competition, pricing goes down and risk appetite goes up. Overexpansion leads to an inevitable correction, with the losses incurred testifying to the long-term unsuccessful nature of the strategy. U.S. banking, securities and finance companies in the early 1990s experienced the late stage of just such a cycle in which commercial real estate and leveraged buyout lending overexpanded. The result was that many large financial institutions had to be merged into others or unwound. Banking supervisors responded to these problems by requiring banks with large, problematic exposures to implement a three-part program. First, the bank comprehensively identified its problem loans and assigned them to workout specialists. Second, the bank developed and executed a capital plan and strengthened its liquidity. Third and essential to raising new capital, the bank developed a new business plan demonstrating its ability to return to profitability. This program worked, in large part because it was applied timely enough. Stylized facts about time’s role on the value of a failing firm created urgency in implementing the program.