to turn around a deteriorating situation and avert failure ; certainly the experience of the financial crisis are sobering in that respect. that underscores the need to develop with alacrity and diligence meaningful recovery and resolution planning for systemically important firms and continue to build a strong international resolution process. recovery planning by firms helps to increase the margin of time available for firms by shortening reaction time when distress occurs and reducing the impediments to recovery and resolution when firms are healthy. similarly, resolution planning gives financial authorities a better starting position and more ability to move swiftly and decisively in a financial firm failure. taken together, augmented resolution powers, recovery and resolution planning and better identification of systemic risks can move us substantially forward in dealing with failing systemically important institutions. thank you for the opportunity to share these views with you.

##ishing capital and liquidity and recasting the business plan was designed around loan exposures, but continues to be relevant today. the challenges are to adapt such a program to the many financial institutions strongly oriented toward capital markets activities with the resulting volatile balance sheets and income streams and to apply the program timely. time also plays an important role when a financial firm is subject to an insolvency process. another stylized fact is that the market value of the assets and business lines often suffer a substantial markdown when a financial institution enters insolvency and may decay further thereafter. the federal deposit insurance corporation ( fdic ), the resolution authority for banks in the united states, routinely experienced losses in resolving banks in the 1980s, when it was required to wait until the bank's book value had reached zero. that led to the provision in fdicia 1991 that a bank can be declared insolvent when its tangible equity falls below 2 percent of assets. a supervisory innovation : recovery planning the potential for rapid decay of asset and business line values unless assets and liabilities are transferred to a permanent owner quickly is a large part of what sets financial institutions apart from other companies entering insolvency. this difference motivates efforts to avert insolvency through supervisory action, as i described earlier. it also motivated u. s. banking supervisors in the early 1990s to ask some troubled banking companies not only to apply the three - part program but also to develop a meaningful contingency plan for reducing risk and raising capital if the first round of actions did not succeed. the supervisors incorporated the requirement to develop contingency plans in its supervisory agreements with those institutions. the cbrg has recommended that all systemically important financial institutions develop recovery plans. i believe the development of such plans by healthy institutions and their discussion by a college of the firm ’ s principal regulators constitute important innovations in the supervision of financial institutions. the cross border crisis management group has provided momentum and a forum for discussion of progress and challenges as supervisors initiate discussion of recovery plans with firms. the discussions we have held in the united states involve the financial institution, its major u. s. regulators and the regulators of the foreign legal entities containing its principal business operations. those discussions have included both the development of a global liquidity contingency plan and a plan to reduce the risk profile of or “ derisk ” the financial firm by winding down or selling business operations or financial assets. the intention is to have recovery plans,