in switzerland, we have opted for a cost - effective regulatory approach. many of the agreed measures have already been implemented. we are therefore confident that the swiss big banks and the swiss banking system in general are much more weatherproof today than they were ten years ago. equally, we are confident that full implementation of the swiss ‘ too big to fail ’ regulations will reduce the false incentives that underlie the issue and create the necessary conditions for resolving the issue here in switzerland. the state should no longer be obliged to use government funds to bail out a bank. page 12 / 14 bibliography afonso, gara, joao a. c. santos and james traina ( 2014 ), do ‘ too - big - to - fail ’ banks take on more risk?, federal reserve bank of new york, economic policy review, 20 ( 2 ), pp. 41 – 58. alessandri, piergiorgio and andrew g. haldane ( 2009 ), banking on the state, speech given at the federal reserve bank of chicago twelfth annual international banking conference, chicago, 25 september. basel committee on banking supervision ( 2016 ), explanatory note on the revised minimum capital requirements for market risk. bernanke, ben ( 2006 ), modern risk management and banking supervision, speech held at stonier graduate school of banking, washington, d. c., 12 june. branson, mark ( 2011 ), the case for more and higher quality capital, finma annual media conference, berne, 22 march. cecchetti, stephen g. ( 2014 ), the jury is in, centre for economic policy research, policy insight no. 76. fdf ( 2016 ), bericht des eidgenossischen finanzdepartements uber die anhorung zu anderungen der eigenmittelverordnung und der bankenverordnung ( eigenmittelanforderungen banken – rekalibrierung tbtf und kategorisierung ). fdf ( 2017 ), erlauternder bericht zur anderung der eigenmittelverordnung ( leverage ratio und risikoverteilung ) finma ( 2009 ), financial market crisis and financial market supervision, report. gambacorta, leonardo and hyun song shin ( 2016 ), why bank capital matters for monetary policy, bank for international settlements, bis working papers, 558

of short - term liabilities without getting into acute payment difficulties. the bank - specific level of these requirements is today partly determined by the bank ’ s degree of systemic importance. in contrast to the pre - crisis era, the regulations now expressly take into account the risks to the financial system and the economy as a whole arising from the failure of a systemically important bank. in this way, the regulations also explicitly rein in incentives for excessive growth in the sector. however, even the new, stricter capital requirements cannot eliminate the risk of a systemically important bank getting into existential difficulties. first, the risks are difficult to assess and they also change over time. second, the very nature of banks ’ operations means that they will always be to some degree susceptible to crises. absolute security can never be achieved if, at the same time, we want to safeguard the useful economic functions of banks. the second pillar of the tbtf regulations comes into play in the event that a systemically important bank gets into financial distress despite increased resilience. it is intended to ensure that the bank is resolvable. in other words : even a systemically important bank should be able to exit the market in an orderly fashion. its recovery or wind - down must not be allowed to jeopardise the stability of the economy as a whole. for this purpose, the regulations stipulate requirements for resolution planning. for example, by end - 2019, systemically important banks in switzerland have to prepare ‘ emergency plans ’ demonstrating that they will be able to continue their systemically important functions in switzerland without interruption in the event of a crisis. the second pillar also specifies requirements for loss - absorbing capacity. systemically important banks must hold sufficient financial resources to cover losses in a crisis or to finance the costs of a separation of systemically important functions. banks can use so - called page 9 / 14 ‘ bail - in ’ instruments for this purpose. these are essentially debt securities which can be converted into equity or written down in the event of impending insolvency. 20 these measures are especially designed to counter the de facto obligation by the state to provide assistance in the event of a crisis. the organisational arrangements facilitate an orderly separation of the central functions within a reasonable timeframe. furthermore, creditors are to participate directly in the default risk. the intention is to ensure a bail - in by creditors rather than a bail - out by the state in the event of a crisis by predefining the