creditors. in the interests of brevity, i won ’ t go into a lot of detail about ola. but my board colleague jay powell talked in depth about this topic in a speech last month, and i would just register my broad agreement with his conclusion – namely that the federal deposit insurance corporation ’ s ( fdic ’ s ) so - called “ single point of entry ” approach to resolution is a promising one. 2 the federal reserve continues to work with the fdic on the many difficult implementation challenges that remain, but i believe this approach gets the first - order economics right and ultimately has a good chance to be effective. perhaps more to the point for tbtf, if a sifi does fail i have little doubt that private investors will in fact bear the losses – even if this leads to an outcome that is messier and more costly to society than we would ideally like. dodd - frank is very clear in saying that the federal reserve and other regulators cannot use their emergency authorities to bail out an individual failing institution. and as a member of the board, i am committed to following both the letter and the spirit of the law. the thoughts that follow are my own, and are not necessarily shared by my colleagues on the federal reserve board. i am grateful to members of the board staff – michael gibson, michael hsu, nellie liang, and mark van der weide – for their advice. see powell ( 2013 ). bis central bankers ’ speeches still, we are quite a way from having fully solved the policy problems associated with sifis. for one thing, the market still appears to attach some probability to the government bailing out the creditors of a sifi ; this can be seen in the ratings uplift granted to large banks based on the ratings agencies ’ assessment of the probability of government support. while this uplift seems to have shrunk to some degree since the passage of dodd - frank, it is still significant. 3 all else equal, this uplift confers a funding subsidy to the largest financial firms. moreover, as i noted earlier, even if bailouts were commonly understood to be a zeroprobability event, the problem of spillovers remains. it is one thing to believe that a sifi will be allowed to fail without government support ; it is another to believe that such failure will not inflict significant damage on other parts of the financial system. in the presence of such externalities, financial firms may still have excessive private incentives to remain

ksh. 18. 5bn. this issue is meant to create impact to the market. however, the infrastructure bond will be redeemed partially in 2015, 2017 and 2021 as an attractive feature for medium term investors who may wish to recoup investment back before expiry of the life of the bond. it will also help treasury at redemption given the huge amount involved. a number of incentives have been given to make the issue attractive and successful. they include ; exemption from withholding tax on interest income, we have revised agency commission upwards, the bond will qualify for statutory liquidity requirements ; the bond will be listed for trading at the nairobi stock exchange, the holders can use it as collateral to acquire loans from banks and banks can pledge it as collateral for repos. the infrastructure bond also gives attractive coupon rate of 12. 5 % p. a. the minimum placement amount will be kshs. 100, 000. 00 while any additional amounts will be in multiples of kshs. 50, 000. 00. the bond will be issued under the provisions of the internal loans act cap 420 and the capital markets authority act cap 485a. this pioneer infrastructure bond is expected to lay ground for government agencies to issue their own specific infrastructure bonds. moreover, future infrastructure bonds will be structured alongside the balance sheets of the issuer where stream of earnings from funded projects will be used to service the bonds. such bonds will be issued strictly under the capital markets authority ’ s asset backed securities regulations. honorable minister, distinguished guests, ladies and gentlemen, it is my hope and prayer that this infrastructure bond will be attractive and be fully subscribed to finance our infrastructure – a necessary condition for our economic development.