their activity and their complexity. the following step was to impose capital surcharges, on a staggered scale from 1 % to 2. 5 %. the second group of reforms refers to resolution, which involves an authority restructuring a bank through the use of specific tools, with the aim of ensuring the continuity of the bank ’ s critical functions and thus preserving financial stability. the essential characteristics all resolution regimes must meet were listed in the fsb document entitled “ key attributes for effective resolution regimes ”. this has been one of the most important agreements reached to date on the matter. resolution in the european sphere, the bank recovery and resolution directive have recently been approved, incorporating the fsb guidelines into the acquis communautaire. in spain, law 9 / 2012 of 14 november 2012 on the restructuring and resolution of credit institutions had already foreseen several of the elements required in this area by the fsb and by the directive. the resolution frameworks, in step with the text of the directive, are structured in three phases : prevention ; early intervention ; and resolution in the true sense of the term. 1. - in the preventive phase, recovery and resolution plans must be designed. recovery plans are drawn up by the banks themselves and should include a series of actions relating to the institution ’ s capital and liquidity in order, should the case arise, to restore its financial equilibrium. supervisors must revise these plans, identifying potential impediments to their proper application. resolution plans are agreed by the resolution authorities and seek to establish a catalogue of actions that the authorities might take in situations in which a credit institution is close to non - viability. 2. - for the early intervention phase, supervisors are entitled to take measures before a bank ’ s financial position deteriorates irremediably. these measures have helped bolster conventional tools, such as limiting dividend pay - outs. these new measures include most notably the possibility of altering a bank ’ s business strategy or the power to call for legal changes in a bank ’ s structure. 3. - the third, resolution phase is what leads to the reorganisation of a credit institution, making use of specific mechanisms. most prominent in this connection has been the socalled bail - in, involving rescuing a bank from the inside, as opposed to the traditional publicsector bail - out. a bail - in entails the possibility of cancelling – or converting into capital – the entitlements of specific shareholders

in point are the volcker rule in the united states, or the measures in the vickers report in the case of the united kingdom. on 29 january this year the european commission published its legislative initiative in this area, based on the recommendations of a group of experts led by erkii liikanen, the governor of the bank of finland. other aspects identified by the fsb, which have occupied much of its deliberations, refer to the reform of the derivatives markets, the growing problem of “ shadow banking ” and convergence between difference international accounting standard - setters. on this very extensive agenda, i should like to focus on two matters : first, i shall review the measures aimed at reinforcing the resilience of banks, which are laid down in the accord known as basel iii ; and second, the treatment of “ too - big - to - fail ” banks, which has given rise, among other things, to the new banking resolution frameworks. bis central bankers ’ speeches the construction of a more robust banking system one of the first lessons learned from this crisis was that the level of capital in the banking system had been insufficient to withstand the risks made manifest by the crisis. further, certain instruments which did not prove effective in countering losses had been considered eligible as regulatory capital. likewise, there were specific risks which were not appropriately evaluated under banks ’ prudential regime. the basel committee, which had been exploring potential prudential improvements, finally rolled out the basel iii accord. basel iii notably strengthens the capital framework : its quality has been enhanced, insofar as new, stricter definitions were agreed upon ; capital ratios were raised ; and two new buffers – a capital conservation buffer and a countercyclical buffer – were created. one notable singularity in the configuration of this latter buffer is that it also offered a response to macro - prudential objectives. that is, admittedly, something new and positive in the regulatory paradigm which, until then, had essentially been micro - prudentially geared. the second novel feature of basel iii has been the design of a common prudential framework for liquidity risk, both in the short term ( the liquidity coverage ratio ) and the long term ( the net stable funding ratio ). it is worth stressing that this is the first time an agreement has been forged internationally for the prudential treatment of this risk. the combined tightening of liquidity and capital requirements advises prudent application