firms must have a liability structure that allows them to absorb losses and to restore solvency to the point that a g - sib can be reauthorised, and command market confidence and access to normal central bank facilities following the resolution. loss absorbing capacity in resolution that is what glac and mrel are meant to help achieve. if g - sibs do not have adequate loss - absorbing capacity when they fail, then the resolution authority may not be able to stabilise them without recourse to public funds. this will mean the pernicious problem of “ too big to fail ” will remain unsolved, and the destructive link between banks and their sovereigns will not be severed. but what exactly does “ adequate ” loss absorbency in resolution mean? that will depend on the size and systemic importance of a firm ; a very small bank with a few hundred depositors may not need any loss - absorbing capacity as its critical functions may be limited to the insured deposits it provides, which are covered by the deposit guarantee scheme ( dgs ). any cessation in service is unlikely to cause financial instability – although, even in the case of the smallest banks, it is important that insured depositors are able quickly to recover their funds via the dgs. but, as i have already noted, given their size and complexity, it is important for g - sibs that there is adequate glac to allow the bank to be stabilised without disrupting its critical functions. this has implications for the size, quality, location and disclosure of g - sibs ’ glac in g - sibs. taking size first : in order that critical functions are not disrupted, prudential authorities around the world must be able to permit the firm in resolution to continue to provide its critical functions ( e. g. deposit taking ). this implies that, at a very minimum, there must be sufficient glac to restore minimum capital requirements. whatever backward - looking accounting may have indicated, experience suggests there is usually little or no equity value left in a bank once it has failed. the prudent, fair and realistic valuation that resolution authorities must conduct in resolution ( as required in the brrd ) will likely crystallise previously unrealised losses or expected losses on the asset side of the bank ’ s balance sheet. this suggests that glac should at least be equivalent to minimum tier 1 capital requirements. it is likely to need a capital position

at least as strong as other banks in the market. and for a bank that brrd article 43 ( 3 ). bis central bankers ’ speeches has undergone resolution to command market confidence, it is likely to need at least as much capital as other banks in the market. it would be sensible therefore for g - sibs to maintain sufficient glac to be able at least to restore fully regulatory capital buffers above capital minima, in order to maintain market confidence that they would be able to absorb any further losses during the restructuring phase without re - entering resolution. one final point on quantum – the ability of stressed systemically important banks to raise their capital position by shedding assets in short order is not sufficiently reliable to warrant a lower glac requirement for g - sibs. so, we can see how much loss - absorbency we might need, but how much of what, exactly? in principle, it should be possible to expose every unsecured, uninsured liability of a bank to loss in resolution, just as would happen in insolvency. but, from experience, we know that some uninsured, unsecured liabilities are not as reliably loss absorbing in resolution as others and, in practice, it has been difficult to break into the senior class. in part this is due to an absence of legal powers to facilitate this – and the brrd addresses that problem. but in part it is because of the potential adverse consequences of taking resolution action within a class which includes liabilities that it is difficult to bail - in and where, although we have the power to exercise discretion in exceptional circumstances, it is undesirable and legally risky to rely on this discretion. just as we require g - sibs to maintain high - quality, long - dated capital instruments that can reliably absorb losses in a going - concern in order to reduce the probability that they fail, so too we should require g - sibs to maintain high - quality, long - dated liabilities that can reliably absorb losses in a gone - concern, in order to reduce the probability that they fail in a disorderly way. so, which liabilities are sufficiently reliably loss absorbing in resolution to count towards a firm ’ s glac? well, any liability that meets the following conditions : • first, it must be sufficiently likely that the liability will actually be there when the firm enters resolution. the brrd requires that, in order to count