, subject to a meaningful process of peer review to avoid free riding. but absolutely central to this is resolution regimes. too many countries do not even have the most elementary resolution regime for their national commercial banking institutions. perhaps partly for that reason, many people, when they talk about resolution, slip after about 15 seconds into talking about enhanced supervision and early intervention. to be clear, resolution is about when everything else has failed. it is about when early intervention and higher capital requirements, better risk management and more resilient capital markets let us down, and we are in “ the last chance saloon ”. the distressed institution is no longer viable, and officials are presenting our political leaders with a ghastly choice between chaos from straight liquidation and, alternatively, taxpayer support to prevent the system imploding. that is a truly terrible choice and so the key thing is to find a new set of measures that can be deployed to give us a tolerable course. that set of measures is what constitutes a resolution regime. it is not about making things perfect. it is about coping. we can all learn from the us ’ s special resolution regimes in this respect, including the extensions in scope to bankholding companies and non - bank financial firms affected by the dodd - frank act. but there are things being debated in europe and in the international community that may even supplement the toolbox that exists already in the united states. one of them is the potential ability for the resolution authority to haircut creditors and partially convert debt into equity in what is otherwise a firm with a viable underlying franchise and so potentially a going concern. this would be an adaptation of chapter 11 regime in the us rather than the standard special resolution toolkit for banks. this set of issues is, at its very core, a cross - border endeavour. we will not get far on this front without much more intimate and trusting co - operation between home country supervisors and resolution authorities and host country authorities. we should not exaggerate the extent to which this has worked well in the past. supervisors even admit that behind closed doors. there seems to be a reluctance, perhaps just about understandable in some respects, to share information amongst home and host authorities and to co - operate when regulated firms are distressed, which of course is when it matters most that they should co - operate. the fsb needs to ensure that we confront and fix this. but a solution cannot emerge without political leaders making space for – indeed, without them positively encouraging – officials

to credit for other uses, and how much restraint are financial market developments likely to exert on demands outside the housing sector? some broader repricing of risk is not surprising or unwelcome in the wake of unusually thin rewards for risk taking in several types of credit over recent years. and such a repricing in the form of wider spreads and tighter credit standards at banks and other lenders would make some types of credit more expensive and discourage some spending, developments that would require offsetting policy actions, other things being equal. some restraint on demand from this process was a factor i took into account when i considered the economic outlook and the appropriate policy responses over the past few months. an important issue now is whether concerns about losses on mortgages and some other instruments are inducing much greater restraint and thus constricting the flow of credit to a broad range of borrowers by more than seemed in train a month or two ago. in general, nonfinancial businesses have been in very good financial condition ; outside of variable - rate mortgages, households are meeting their obligations with, to date, only a little increase in delinquency rates, which generally remain at low levels. consequently, we might expect a moderate adjustment in the availability of credit to these key spending sectors. however, the increased turbulence of recent weeks partly reversed some of the improvement in market functioning over the late part of september and in october. should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses. heightened concerns about larger losses at financial institutions now reflected in various markets have depressed equity prices and could induce more intermediaries to adopt a more defensive posture in granting credit, not only for house purchases, but for other uses a well. liquidity provision and bank funding markets central banks have been confronting several issues in the provision of liquidity and bank funding. when the turbulence deepened in early august, demands for liquidity and reserves pushed overnight rates in interbank markets above monetary policy targets. the aggressive provision of reserves by a number of central banks met those demands, and rates returned to targeted levels. in the united states, strong bids by foreign banks in the dollar - funding markets early in the day have complicated our management of this rate. and demands for reserves have been more variable and less flexible in an environment of heightened uncertainty, thereby adding to volatility. in addition, the federal reserve is limited in its ability to restrict the actual federal funds rate within a