Finally, I should mention the agreement reached to introduce a new supervisory instrument, the leverage ratio, which is not directly linked to a bank’s level of risk; for this reason, it counters to some extent the potential shortcomings present in internal models for calculating capital needs. That leads us to one of the major issues currently under consideration: the use of internal models for evaluating the weighting of risks. There is known to be wide-ranging variability in the calculation of risk-weighted assets across different banks. The Basel Committee itself has published a report on this matter, and increasing numbers of experts and regulators deem it advisable to study the implications of the use of internal models in terms of how they affect the lack of transparency in the calculation of capital requirements and in order to ensure a level playing field for all banks. The prudential regime of systemic banks: more capital and a resolution framework A further aim of the FSB has been to eradicate, or at least alleviate, the externalities created by systemic “too-big-to-fail” institutions. Systemic banks are those which, given their interrelatedness, size and complexity, might entail, in the event of bankruptcy and disorderly liquidation, serious difficulties for the rest of the financial system. The systemic repercussions of the collapse of a bank of such characteristics, as evidenced following the Lehman Brothers bankruptcy, was the driving force behind the authorities having subsequently to bail out other institutions, with the ensuing burden on public funds.

The resolution frameworks, in step with the text of the Directive, are structured in three phases: prevention; early intervention; and resolution in the true sense of the term. 1.- In the preventive phase, recovery and resolution plans must be designed. Recovery plans are drawn up by the banks themselves and should include a series of actions relating to the institution’s capital and liquidity in order, should the case arise, to restore its financial equilibrium. Supervisors must revise these plans, identifying potential impediments to their proper application. Resolution plans are agreed by the resolution authorities and seek to establish a catalogue of actions that the authorities might take in situations in which a credit institution is close to non-viability. 2.- For the early intervention phase, supervisors are entitled to take measures before a bank’s financial position deteriorates irremediably. These measures have helped bolster conventional tools, such as limiting dividend pay-outs. These new measures include most notably the possibility of altering a bank’s business strategy or the power to call for legal changes in a bank’s structure. 3.- The third, resolution phase is what leads to the reorganisation of a credit institution, making use of specific mechanisms. Most prominent in this connection has been the socalled bail-in, involving rescuing a bank from the inside, as opposed to the traditional publicsector bail-out. A bail-in entails the possibility of cancelling – or converting into capital – the entitlements of specific shareholders and creditors of credit institutions in a position close to insolvency.