www. federalreserve. gov / newsevents / testimony / gibson20130515a. htm. bis central bankers ’ speeches could be bailed in, becoming part owners of the bank, alongside the bondholders. precious time would be lost. the ras need a degree of carefully constrained discretion to ensure that complex resolutions can be implemented in the real world. but there is a second, bigger point. the preferred path is not guaranteed by heaven to work. for example, resolution of a group ( or sub - group ) by a top - down bailin would not work where, in the particular circumstances of its distress, the group ’ s problems proved to be so pervasive, so toxic and its business controls and information systems so hopeless, so chaotic that it was impossible to make a reasonable ex ante estimate of expected losses. in that absolutely disastrous but not unthinkable circumstance, the ra would need a fall - back plan. in the uk, the government ’ s plan for ring - fencing provides the basis for just such a back - up strategy. under the proposals, essential payment services and insured deposits would be provided by a ring - fenced bank ( rfb ), capitalised separately and with no direct financial links to the group ’ s other businesses. if that succeeds in making the rfb super - resolvable, it should be easier for the uk authorities to retreat to maintaining at least the most basic payments services if a preferred strategy of top - down resolution of a whole group could not be executed. the introduction of ring - fenced domestic retail banks is, therefore, consistent with the broader international agenda on resolution. for each sifi, the global authorities probably need not only a preferred resolution strategy for the group as a whole, but also a fall back. for example, are the clearing services provided by broker - dealers so important that they need to be maintained come what may? recovery plans and preparing for resolution a final point. there is great emphasis on recovery and resolution plans, rrps. as familiarly used, recovery is a binary process – either it works, the firm survives and, thankfully, there is no resolution ; or, alternatively, the best - laid and executed recovery plan fails, the firm fails, and it enters resolution. but this is too crude a way of thinking about recovery. of course recovery is primarily about delivering recovery. that is what we all want. but it is not all. the period in

global financial institution ( lcfi ). the basel committee on banking supervision ’ s core principles for effective banking supervision ( 2012 ) require ‘ the operational independence, accountability and governance of the supervisor [ to be ] prescribed in legislation and publicly disclosed, [ with ] no government or industry interference that compromises the operational independence of the supervisor. ’ bis central bankers ’ speeches legitimacy and is subject to the right checks and balances. 5 the key process is, of course, the vetting and passage of legislation. that process is well underway in the key jurisdictions. establishing the statutory regime in november 2011, the g20 leaders endorsed the financial stability board ’ s key attributes for resolution as an ‘ international standard ’. that term of art means that all the jurisdictions of the g20 are committed to incorporate the key attributes ( kas ) regime into their domestic legislation. the us has largely done so. the eu is very close to doing so, through its recovery and resolution directive. switzerland has largely done so. between them, this will account for the home countries of 24 of the 28 globally systemic banks listed by the fsb and the basel supervisors committee last year. it is unlikely that in future decades the west will account for such a large share of the world ’ s unequivocally systemic firms. in both asia and latin america, a number of jurisdictions have made progress with putting the ka regime on to a statutory footing. but it is probably fair to say that not a few emerging - market countries are watching progress in the eu. indeed, it is not an exaggeration to say that the eu ’ s directive is the keystone to breaking the back of the tbtf problem. how? the toolkit for resolution authorities established by the kas obviously includes the workhorse techniques for resolving standard commercial banks. either : liquidation with prompt payout to insured depositors by the deposit guarantee scheme ( dgs ), commonly known as liquidation and payout ( l & p ). or : what the us call purchase & assumption ( p & a ) – selling to a third party the distressed bank ’ s deposit book together with some cash injected by the dgs and perhaps some other good assets. at its simplest, p & a involves splitting the distressed bank into ‘ good ’ and, let ’ s say, ‘ not so good ’ bits. the deposit book and cash might for a while be held in a bridge bank controlled by the resolution authority ( ra ), pending sale to a purchaser