first place. after first describing some of the current implementation challenges associated with title ii resolution, i will return to this second issue. implementing the resolution regime on a cross - border basis remains one of the most significant challenges. u. s. authorities are working with authorities abroad on the issues that require international collaboration, but the financial industry also has a role to play in overcoming these challenges. i encourage the industry to promptly address the matters that require action on their part. in particular, i am worried about two current shortcomings : • the reach of title ii ’ s one - day stay on the close - out of qualified financial contracts is incomplete and does not extend to contracts governed by non - u. s. law with nonu. s. counterparties. bis central bankers ’ speeches • the placement of the parent company into receivership may be treated by these counterparties as an event of default due to the presence of a parent guarantee or other cross - default provisions triggered by the parent - level insolvency. unless market participants make the appropriate contractual changes that will ensure that the entry of the parent company into title ii will not trigger the close - out provisions of those over - the - counter derivatives and other qualified financial contracts that are outside the reach of title ii ’ s u. s. application, foreign counterparties to the systemically important firm will tend to exercise this right whenever it is in their individual economic interest to do so. this would create significant difficulties because such actions could greatly complicate the operations of the firm during a time when it is already under considerable stress and would propagate stress more broadly in financial markets. there are two main options for addressing this issue, and they are not mutually exclusive. existing derivative contracts need to be amended and future contracts need to provide that the parent ’ s entry into the title ii proceeding does not trigger the close - out option, or legal changes need to be implemented abroad so that the “ one - day stay ” that applies to qualified financial contracts governed by u. s. law is enforceable against those contracts governed by foreign law. only by making these changes can we avoid the potential for disruptive closeouts. i strongly encourage the ongoing efforts to address this critical issue. a second issue with respect to title ii resolution is that we cannot be certain how foreign authorities will react when the parent is put into the title ii proceeding. while the u. s. authorities have been in discussion with our colleagues abroad to enable the coordination needed

root causes of their problems and identify longer - term strategies that will need to be employed as other recovery options to restore capital and liquidity are being executed. and firms must support the viability of their contingency and recovery plans by implementing the internal governance necessary to develop, test, update and implement them credibly. there is also more work that we, as supervisors, can do to reduce the probability of failure and to incent firm managers to act well before resolution becomes necessary. we need to do more to create incentives to force banks to act sooner to steer away from impending icebergs – cut capital distributions earlier, raise new capital faster, restructure businesses sooner, and restructure senior management and boards of directors more radically when the firm is not performing well. for example, one approach might be to implement a long - term debt requirement in a way that enhances market discipline. another reform would be to reduce the incentives of large, complex firms to rely on shortterm wholesale funding to finance longer - term, illiquid assets. among other benefits, reducing a firm ’ s susceptibility to sudden runs associated with short - term wholesale funding will lengthen the “ runway ” for management to implement the strategic actions that would restore the firm to health. let me conclude by emphasizing that these two paths – reducing the financial stability costs associated with the failure of a systemically important financial firm versus applying tougher capital and liquidity standards for such firms that reduce the probability of failure – are complements not substitutes. we need to keep pushing forward with both approaches in order to make the financial system more resilient and robust. thank you for your kind attention. i would be happy to take a few questions. bis central bankers ’ speeches