transpose the key attributes into national legislation. the financial stability board is closely monitoring this process. a recent peer review by the financial stability board4 showed that implementation is still at an early stage in many g20 countries. implementation efforts therefore have to be treated as an urgent matter in all jurisdictions. we would have to pay dearly for any delay. to summarise, we cannot accept any excuse for deviations from timely implementation. 3. 2 europe ’ s implementation of resolution rules : key issues in europe, the implementation of resolution rules has been carried out through ecofin ’ s agreement of 27 june 2013. 5 the council adopted its general approach on the draft directive for the recovery and resolution of credit institutions and investment firms. i welcome the general thrust of the recovery and resolution directive – or rrd. and i hope that the trilogue process with the european parliament can be completed swiftly, as planned. please allow me to look in more detail at three key issues relating to the rrd. first, the bail - in tool : this enables resolution authorities to write down the claims of shareholders and write down, or convert into equity, the claims of creditors of institutions which are failing or likely to fail. as predictability is crucial when it comes to allocating losses, i very much agree with the council ’ s general approach stipulating a clear pecking order. shareholders will be the first in line to bear losses, followed by clearly defined classes of creditors. very few classes of liabilities are permanently exempted from any bail - in, with covered deposits being the most important category. i also broadly agree with the council ’ s list of permanent exemptions – with only one reservation. excluding all inter - bank liabilities with an original maturity of fewer than seven days could have far - reaching consequences, as it may well foster an unwanted bias towards short - termism. i would therefore argue that these liabilities should be shifted from the permanent to the discretionary category of exemptions. in general, the bail - in tool should enter into force in parallel with the other resolution tools, that is, in 2015. second, i welcome the minimum requirement for own funds and so - called eligible liabilities. this will ensure that each institution has sufficient loss - absorbing capacity based on its size, risk and business model. third, i wish to comment on resolution funds. as a general rule, the draft rrd requires member states to set up resolution funds, which are to be funded ex -

andreas dombret : systemic risk, too big to fail and resolution regimes speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the salzburg global seminar “ out of the shadows : should non - banking financial institutions be regulated? ”, salzburg, 19 august 2013. * * * introduction good afternoon, ladies and gentlemen it ’ s a great pleasure to take part in this salzburg global seminar. many thanks for inviting me back. over the next twenty minutes, i would like to share my views on how to deal with systemic risk and moral hazard. while concepts have been developed to initiate regulatory reforms, it troubles me tremendously to have to state that the “ too - big - to - fail ” problem still remains unresolved. market participants continue to anticipate that governments will rescue systemically important financial institutions – or sifis – in the event of their failure. the resulting refinancing advantage is reflected in so - called rating “ uplifts ”. rating agencies usually calculate two different ratings for banks. one is a “ stand - alone ” rating that measures a bank ’ s genuine creditworthiness. the other is the “ all - in ” rating which includes the likelihood and extent of external support available for the bank ’ s debt. the difference between these two ratings is the “ uplift ”. it delivers a proxy for funding subsidies, which are benefiting sifis. although these uplift factors have recently shrunk to some degree, they unfortunately remain substantial. 1 this could be taken as an indicator supporting my claim that the “ too - big - to - fail ” problem remains unresolved. however, in this regard we need to achieve two objectives at the same time. first, taxpayers should not have to foot the bill for bank failures and, second, systemic disruptions must be avoided. the experiences following the lehman collapse five years ago show how important financial stability is – and how fragile. so, what can we do about the “ too - big - to - fail ” problem? solving the “ too - big - to - fail ” problem 2. 1 how to make bank failures less likely i am convinced that overcoming the “ too - big - to - fail ” problem will require a multi - track approach. the main goal is to make sifis less likely to fail by increasing their loss - absorbing capacity. basel iii represents a landmark change in this respect. these rules are much more rigorous