. the new resolution framework is intended to rectify the inconsistencies ; to clarify the position of investors, depositors, policyholders and creditors in the event of a failure ; to ensure the fair bis central bankers ’ speeches and transparent allocation of losses with appropriate safeguards ; to put measures in place for the funding of resolution actions ; to provide protection where it is most needed ; and to introduce the tools necessary for maintaining financial stability and ensuring the continuation of critical financial services. the key elements of an effective resolution framework the discussion paper sets out the key elements of an effective resolution framework, as it could be applied to south africa. it is important to understand that the term ‘ resolution ’ is not a synonym for ‘ liquidation ’, ‘ curatorship ’ or ‘ administration ’, the latter terms representing south africa ’ s current arrangements for dealing with failed financial institutions. resolution in the context of the key attributes is a new concept that requires a paradigm shift. going forward, resolution is about earlier intervention, preserving value, restoring confidence, and preventing ‘ fire sale ’ losses. going forward, resolution is about allocating losses where they are due without necessarily having to liquidate, and about being able to rectify malpractices, structural problems and mismanagement while there is still a chance for recovery. going forward, resolution is focused at maintaining critical functions rather than rescuing legal entities. going forward, resolution is about protecting broader financial stability instead of protecting only particular groups of creditors or depositors. the intention is to establish a new, strengthened framework for resolution by drafting and promulgating a special resolution bill. the main objective of this special resolution bill will be to maintain financial stability in the event of an institutional failure. i will highlight the main elements of the new framework, each of which is discussed in detail in the paper itself. i. the paper introduces the concept of a ‘ designated resolution institution ’, applicable to any financial institution whose failure would disrupt financial stability. the special resolution bill will apply to all banks and to systemically significant non - financial institutions. the bill will potentially ( but not necessarily ) apply to financial groups from the level of the ultimate holding company ; this will be determined by the structure and operations of each financial conglomerate. ii. the south african reserve bank will be the resolution authority, in line with its financial stability mandate. however, appropriate consultation and coordination requirements as well as appropriate governance and accountability arrangements will be in place. iii. resolution plans and resolvability assessments

francois groepe : strengthening south africa ’ s resolution framework for financial institutions address by mr francois groepe, deputy governor of the south african reserve bank, at the public workshop on the discussion paper titled “ strengthening south africa ’ s resolution framework for financial institutions, cape town, 15 september 2015. * * * introduction : addressing ‘ too big to fail ’ after the global financial crisis of 2007 / 08, and the severe and lingering consequences thereof on the global economy, one of the key items on the agenda of the g - 20 ( the group of twenty finance ministers and central bank governors ) was to address the ‘ too big to fail ’ problem. during the past couple of decades, financial sectors have outgrown the size of their national economies and have expanded beyond their national borders. the individual balance sheets of large, global financial conglomerates are now larger than those of most economies. for example, the balance sheet of jp morgan chase amounted to us $ 2, 6 trillion in 2014 – larger than the gross domestic product, or gdp, of all but the six largest economies in the world1. moreover, the activities of these large financial institutions are highly interconnected, and the services they provide are inseparably integrated into the modern financial system and the global economy. unlike non - financial corporates, which can be liquidated in the event of failure even if they are large, the failure of a single large financial institution can disrupt the functioning of the whole financial system and the economy so that the ultimate cost of the failure far exceeds the initial losses that caused the failure. 1 this is what had forced governments to intervene in past financial crises, and what came to be known as the ‘ too big to fail ’ problem. the ‘ too big to fail ’ problem is not only a global phenomenon. in south africa, banks ’ total assets amount to some r4, 4 trillion. this approximates to 125 per cent of south africa ’ s gdp of about r3, 7 trillion. the assets of long - term insurers amount to about r2, 4 trillion, and those of self - administered pension and provident funds to r1, 7 trillion2. these are just some examples to show how important financial institutions have become in our own economy, and how exposed the system has become to the consequences of a failure of one of the significant financial institutions, especially since the financial system is highly concentrated and interconnected. even if government were willing to support these institutions in the event