to have such a regime is a great mistake. it can indeed be a disaster, as the uk very sadly demonstrated through the northern rock problem, with spillovers to confidence beyond our borders. why do i start with this? essentially because, at present, very few countries of the eu – including until 18 months or so ago the uk – have a national resolution regime for conventional commercial banks. this is a real gap in the infrastructure for the financial system. one of the most important things the eu can do in the period ahead is to say to all of the member states “ you really must have the elementary regime that exists on the other side of the atlantic ”. that benchmark system enables us, the authorities, to take a distressed bank and transfer the deposits to another viable bank, transfer or sell the good assets, and put the bad assets into receivership or run off. plainly this requires safeguards if it interferes with property rights. so that ’ s the first proposition. i ’ ll now go on to talk about globally important, systemically important financial institutions ( so - called sifis ), where the issues are much harder, way more important and much more topical. but we should not lose sight of that vital first step. it is the foundation stone ; and one that will help us to speak a common language on resolution. the second proposition is that we must, as a global community and as a european community, develop tools to be able to resolve the largest, most complex cross - border systemically important financial institutions. this is absolutely at the core of the work to address the problem of too big to fail. and unless we make real progress with this problem, we won ’ t bring back into our financial system the market discipline on which capitalism relies. the goal, of course, is to be able to resolve distressed giant institutions, complex institutions, without taxpayer solvency support, but also without disastrous disruptions to the flow of essential financial services to our economies. i would say two substantive things about the tools needed to make this feasible. first of all, as the crisis around the world has demonstrated, we need to extend the basic resolution toolkit i was talking about beyond commercial banks to bank holding companies and to affiliated companies ; in other words, to groups. and we must extend the scope of the basic resolution regime to non - bank financial institutions and groups in circumstances where their distress could prove systemic. this is essentially what the dodd - frank act does in the united states

rules and legislation that comes out of the process here in brussels, without infringing on national sovereignty. the fourth point i would make is that the eu, as well as leading the way in addressing that problem regionally, must take a very close interest in the arrangements for global resolution, because pretty well every single one of europe ’ s largest financial institutions operates on a global scale and, furthermore, the largest global institutions headquartered outside the eu all have sizable and complex businesses within the eu. in the run up to the g20 meeting of finance ministers and governors in october and then the leaders summit in november, our community and the political community will have to think about the extent to which sovereignty in this area could be pooled or whether, instead, to come up with a middle road which at least removes obstacles to co - operation. i suspect it is unrealistic at this stage of global financial development and co - operation for there to be a multilateral binding treaty that would put a single country in the sole and unqualified lead in the resolution of a global financial institution. but that doesn ’ t mean that there is nothing useful to do. we could do things along the following lines. first of all, in our national and eu legislation, we could all remove impediments for one country to co - operate with other countries in the event of a resolution. this sounds quite straightforward but actually it would be quite a step because, of course, all of us are answerable to our national parliaments. but nor do i think it is realistic for countries to engage in or embark on what one might think of as unilateral disarmament, where a country that acts as host to financial institutions says to the home countries “ i will let you lead in the resolution of all banks in all circumstances, notwithstanding whether you take account of the interests of my country ”. so countries probably need to reserve some powers for themselves but should eliminate from their regimes any automatic triggers that can cut across sensible resolution led by a firm ’ s home country. the other step that we could sensibly take, i suspect, is for there to be much closer planning on a bilateral basis between host and home countries in respect of particular banks. i mean at the level of entering into more or less binding agreements on who would do what in the event of distress. that, again, sounds easy, but actually it would be embarking on quite a change from where we are right now. and