of operational and cyber risk. recovery and resolution regimes for ccps need to take more account of threats to ccps from this direction. whether this should mean more loss absorbing capital at ccps, access to member resources in the event of non - default losses or some combination of the two is a matter of ongoing discussion. but given the role ccps play in the financial system, we need to think more about how we would resolve a ccp that had suffered a major operational failure, without entry into insolvency. similar issues arise in the context of the resolution of systemically important banks. having published guidance on resolution strategies for ccps in 2017, the financial stability board ’ s fmi cross border crisis management group is now focused on two issues that remained outstanding ; namely the adequacy of financial resources for resolution and the treatment of equity in resolution. bank resolution the lehman brothers episode with which i started today exposed brutally that insolvency is not an option for large cross - border banks that perform critical economic functions. one of the main objectives of the post crisis reforms has been to put in place bank resolution regimes that enable the authorities to stabilize a failing bank by bailing in its debt holders to restore solvency and regulatory capital. the aim, as i have said, is to enable the bank ’ s critical economic functions to continue, without taxpayer support, while it is being resolved. a great deal has been achieved. all speeches are available online at www. bankofengland. co. uk / speeches we now have agreed international standards covering the design of resolution regimes, the amount of ‘ bail - inable ’ resources banks must hold, and agreement with industry participants to ‘ stay ’ termination rights by counterparties in derivative and repo transactions if resolution is in train. alongside this we also have international guidance on how to ensure continuity of access to fmis as well as on the mechanics of executing a bail - in. the uk now has in place a comprehensive and effective bank resolution regime that implements the eu ’ s bank recovery and resolution directive ( brrd ) and the international standards. the bank of england has been established as the uk ’ s resolution authority with a wide range of powers to ‘ bail in ’ shareholders and creditors of failed banks. the biggest uk banks have begun to issue bail - inable debt at scale and are well on their way to meeting the target for loss absorbing resources in resolution. key policies and guidance to firms have been issued, notably on operational

situation, the underlying reality was that government finances were often buoyed artificially by cyclically sensitive revenues. with the deterioration of the economic situation the structural weaknesses in the underlying fiscal position became evident culminating in the current sovereign debt crisis in some euro area countries. these developments highlight important shortcomings not only at the level of national policymaking but also with respect to the institutional framework at the european level. the stability and growth pact ( sgp ) was watered down in 2005 and has been ineffective in preventing the build - up of significant fiscal imbalances. peer pressure has not worked and the changes in the fiscal rules in 2005 have led to excessive political interference and the lack of effective implementation. moreover, the institutional framework so far lacks any effective tools for macroeconomic surveillance which could prevent the emergence of bis central bankers ’ speeches macroeconomic imbalances. the broad economic policy guidelines have proven not to be an effective tool. before turning to the necessary policy responses i would like to stress that the fiscal and macroeconomic policy challenges are not problems which some euro area countries face in isolation but are also evident in many other advanced economies outside the euro area. government deficit and debt levels have reached historically high levels. concerns about the soundness of fiscal policies are a broader phenomenon, as, for example, discussed in imf research and highlighted by the recent lowering of the outlook for the u. s. sovereign debt rating. also issues of competitiveness and external imbalances are global in nature and not specific to the euro area. but this is not an excuse for the europeans not to bring their house in order. what has to be done? a number of policy implications for the euro area follow from this analysis. the main objective has to be a smooth functioning of emu which implies that countries follow a path of sustainable and balanced growth. the strategy to achieve this consists of two key elements : first, to unwind the imbalances that had arisen during the first decade of emu ; and second, to ensure an adequate institutional framework and sufficient structural flexibility of individual member states so that the risk of such imbalances occurring again is minimised. the first challenge is to restore price and cost competitiveness. in a monetary union such as the euro area, with a single currency and a single monetary policy, the main adjustment mechanism is the competitiveness channel which works via an adjustment in relative prices and costs. over the next few years, the restoration of competitiveness will require significant further adjustments