addressed in the key jurisdictions. we have, of course, yet to see how the new resolution powers operate in practice. but we now have a crucial, far reaching capability that we lacked entirely eight years ago. we need to be clear at this point what we mean by ‘ resolution ’ powers and authorities. ‘ resolution ’ does not mean ‘ resurrection ’ of a fallen bank. rather, it means stabilising the bank so that, over time as far as is necessary, it can be either split up, restructured or parts of it put into insolvency in an orderly way. these new responsibilities and powers, crucially, do not only cover what happens when a bank can no longer carry on operating ; they also cover how a bank organises and finances itself when it is operating normally. a key lesson of the crisis is that the structure and financing of a bank when it is operating normally can make it impossible to deal with its failure in an orderly way. if banks are not structured and financed in a way that supports orderly resolution before they run into trouble, the authorities ’ options can be very constrained when the bank fails. ( iii ) bank structures this brings me to the third plank of ending too big to fail. banks before the crisis were not organised to be resolvable. the third plank is to ensure that banks are structured in a way that supports resolution and that barriers to resolvability are removed. this can be a daunting challenge – the average number of separate legal entities at g - sibs is around 1, 000 and in some cases is much higher. 9 this may seem a rather gruesome business. it is not usual for a firm to spend a huge amount of time planning for its demise. it is certainly an onerous business for all concerned. in the uk, the bank has to prepare resolution plans for around 200 banks and building societies, based on information provided by the firms. but it is a necessary business. non - financial firms can fail and go into insolvency without widespread damage to the economy and financial system. banks, once they get above a certain size, cannot. ( iv ) loss absorbency the fourth plank is to ensure in advance that banks are financed in a way that supports resolution. this is perhaps the most difficult part of the puzzle as it goes to the heart of that ever difficult question of ‘ who pays? ’ clearly, the shareholders stand first in the line. and by strengthening bank capital we have

fails. clearly, getting a creditor to accept this in advance has a cost ; there will be a premium for carrying such an explicit risk. that cost is, however, simply the counterpart of the hidden subsidy being given to banks by the implicit taxpayer guarantee that applies if they cannot be resolved in an orderly way. we now have international agreement on the minimum amount and nature of this type of loss absorbing instrument – which goes under the unlovely name of ‘ tlac ’ – that the largest, globally systemic banks should issue. 11 and in the eu, under the banking recovery and resolution directive ( brrd ), resolution authorities will need to set in advance, for each firm, the overall amount and nature of the resources that can absorb loss both when the firm is a going concern and when it can no longer operate – this goes under the equally unlovely name of mrel. ( v ) international co - operation the final plank is international cooperation. the hardest challenge in ending too big to fail is dealing with the failure of systemically important banks that operate in a number of jurisdictions. the crisis proved beyond doubt that we did not have the international machinery to handle this. we have invested considerable effort into addressing these shortcomings by increasing coordination between authorities and ensuring that national authorities also have the right incentives to cooperate in a crisis. for example : • we have developed firm - specific cooperation agreements ( coags ) to increase cross - border coordination and information - sharing between home and host authorities. • we have set up crisis management groups ( cmgs ) to agree resolution plans for globally systemically important banks. the uk is involved in cmgs for four g - sibs as home authority and 14 as a host authority. through cmgs we are making concrete changes in the set - up of firms that will help ensure that when faced with a crisis, authorities will stick to their ex - ante agreements. so - called ‘ internal tlac ’ is a notable example – it enables losses to be passed up to the relevant part of the group. see financial stability board ( 2015 ). bis central bankers ’ speeches • in the european union, resolution colleges have been established in accordance with the brrd for cross - border firms that have operations in more than one member state, and the uk expects to be involved in around 20 as home or host authority. impact of reforms to date this multi - pronged programme of measures to address too big to fail is already having an effect. ratings