Rather, it is our intention to take several months for the bail-in valuation to ensure that through an independent valuation process, losses as far as possible are bottomed out and tie back to the reorganisation plan for the surviving business. It will be critical to determine the net asset value that had been generated in the bail-in and the liability holders it should go to as compensation. You may ask, what happens in the intervening period? From the perspective of the debt investor, our intention on entry to resolution is to take control of the shares in issue and immobilise all the other external  12  The Bank of England published a consultation paper on valuation capabilities to support resolvability on 17 August 2017. See https://www.bankofengland.co.uk/-/media/boe/files/financial-stability/resolution/boes-proposed-policy-on-valuation-capabilities-tosupport-resolvability.pdf?la=en&hash=4044F91DF1DDE7A131EA3186F66F304380553306 . 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  MREL instruments at the relevant international central securities depository (ICSDs) and central securities depository (CSDs). We will at the same time issue onto the bondholders accounts at the ICSDs a tradeable certificate of entitlement secured by the shares in issue. There will be as many classes of certificate as there are classes of claim. Once the valuation is complete and we have announced the terms of exchange, holders will present the certificates in exchange for whatever equity they are entitled to as compensation. The resulting shareholders will then vote in a new board and the firm will return to private sector control.

Increasing scarcity in that segment of the cash 5 / 10  BIS central bankers' speeches  market then also translated into a persistent rise in the specialness premia of such bonds, even when abstracting from year-end effects. Our decision to accept cash as collateral in securities lending, and to allow purchases below the DFR, contributed to relieving this pressure. Premia across maturity buckets are now broadly similar. The relatively low specialness premia for bonds with shorter maturities, in turn, also suggests that the majority of holders of such bonds – mainly non-euro area investors without access to our deposit facility, as I illustrated in a previous speech – were, and remain, generally willing to provide them in sufficient quantity in the repo market.10 Yet, this chart also reinforces the point I made earlier about the flow and stock effects of our purchases: with the effective supply of bonds gradually shrinking over time as a result of our purchases, specialness premia have been persistently inching upwards.11 While stock effects reinforce one of the key transmission channels of the APP by increasing the “value for money” – the bang for the buck – of new net purchases in terms of their impact on financial conditions, we also need to be mindful that a shortage of government bonds may over time adversely affect the intermediation capacity of repo markets. There are two reasons for this. First, government bonds are the main type of collateral used in repo markets, primarily because of their safety and liquidity.