part of a resolution of a g - sib. bis central bankers ’ speeches but the risk / funding cost curve is not linear, at least not over its entire length. at some point requiring more and more loss absorbency to be provided by the private sector will come at an increasingly steep price. there must be events sufficiently far into the tails of the relevant distributions that no private balance sheet can reasonably be expected, ex ante, to bear the associated loss, no matter what the price. should such an event occur, policymakers will still face the decision of whether to close or support the institution. the policy task is not, in my view, one of ensuring that the probability of such an event is absolutely zero, but of making it acceptably low at an acceptable price. most particularly, we need to prevent a recurrence of a situation in which outcomes that are not, in fact, especially remote put the system in need of a public rescue. it equally follows that we are not trying to extend the regulatory “ perimeter ” indefinitely. there will always be some risky activity around the fringes of the system, and there is nothing particularly wrong with that. those who seek high returns, and are prepared to accept the risk, should be allowed to do so. there is value in that occurring. the proviso is that as well as allowing such risk - takers to accept the rewards of their activities, we have to be able safely to allow them to wear the losses. we cannot have them generating significant spillovers to the parts of the financial sector that are publicly underwritten or that are key to the day - to - day functioning of the economy. where such spillovers do exist, rules that serve to isolate the risk - taking activities, to keep them genuinely on the fringe, are in order. this is perhaps the greatest regulatory challenge for the future : assessing when an activity that is technically outside the “ perimeter ” might be about to present a threat to overall stability. devoting a lot of resources to ever greater refinements to the details of existing regulatory structures will not help us do that. having the big things inside the perimeter about right should be good enough. after that, we need to make sure we devote adequate resources to keeping a general weather eye on the broader situation, beyond just the area illuminated around our current lamp post. with the pace of technological change, it probably will not become easier to do that. the possible rise of “ virtual ” currencies

glac requirements. another important consideration is to mitigate the risk that imposing losses on holders of glac will trigger destabilising contagion among investors. measures to protect against this risk could include : the subordination of all glac liabilities, to reduce creditor uncertainty about the position of glac liabilities in the hierarchy of claims ; limitations on the term of glac liabilities, to guard against the potential for runs on glac ; and measures to limit cross - holdings of glac by other financial institutions, to reduce the prospect of losses on glac holdings significantly weakening other parts of the financial system. we have seen that in times of uncertainty financial markets often shoot first and ask questions later, so the task of protecting against contagion should not be underestimated. there are examples from the recent crisis, and previous ones, where large banks have been resolved by imposing losses on their shareholders, junior bondholders and, in some cases, their senior bondholders. i am not aware, however, of any case where a bank returned from resolution as a privately owned entity, trading under its original name, having been recapitalised by private creditors alone. bis central bankers ’ speeches these and other issues on glac will be debated over the coming months, with the intent to put a proposal to the g20 leaders summit in brisbane in november, which would then go to public consultation and a quantitative impact study. other elements in addressing “ too big to fail ” come under the heading of international cooperation, of a kind that goes beyond high - level statements of good intentions. by definition, the smooth resolution of a global systemically important bank would have to be an internationally cooperative one. hence cross - border cooperation agreements, in which home and key host jurisdictions accept and agree to be bound by a framework setting out their obligations and rights, would be central. settling these agreements is running behind the timetable originally envisaged, partly reflecting existing statutory hurdles to information sharing. recognition of resolution actions taken in another country in respect of a g - sib, which may involve stays of various kinds, would also be key. this will require, among other things, legislation in a number of jurisdictions. more generally, legislatures need to ensure that the relevant regulators have a mandate to cooperate effectively and share information with their counterparts elsewhere in the world and the legal tools to take part in relevant resolution actions. limits to regulation? so there are