draw lessons about whether it needs refinement over time. second, given the prevalence of internationally active banks in a globalised economy, national authorities just must be able to work together – in reality ; when it matters – to control the resolution of banks whose activities cross borders. 27 and third, as by now this was re - affimed recently in a joint statement by the us federal reserve and the department of the treasury ( www. federalreserve. gov / newsevents / press / monetary / 20090323b. htm ). work is underway under the auspices of the financial stability board, which published principles endorsed by g20 heads of government in april ; and in the basel committee of banking supervisors. these issues were also discussed recently by eric rosengren, president of the federal reserve bank of boston in a speech at the institute of regulation and risk, hong kong, 5 may 2009 “ challenges in resolving systemically important financial institutions ”. many others have said, 28 we need to find a solution to too - big - to - fail, or too interconnected, too complex – however one wants to think about it. that might involve requiring banks to have credible resolution plans for themselves, with higher regulatory capital and liquidity charges entailed if they do not. as we have seen across many countries during the current crisis, governments can otherwise end up having to provide capital support in order to prevent the financial system unravelling, with unfathomable costs for the real economy and so for households. the long lesson of history is that we must build a resilient system ; but that we and our successors would be foolhardy to imagine that governments will never again need to provide capital to save the day. if that is right, then society needs principles and policies for what might be called “ capital of last resort ”, to sit alongside the lender of last resort ( lolr ) principles developed by and for central banks since the 19th century. clear and timeless principles in this area barely exist. there are just 30 or so mentions of colr on the web. one possible starting point is how we have learned to think about bespoke liquidity - support operations. after explicitly recognising that occasionally liquidity support operations can end up providing de facto risk capital if the recipient deteriorates, the late eddie george offered some thoughts on this in 1993 ; 29 “ central banks are not in the business of providing public subsidy to private shareholders.

small, take responsibility for understanding and mitigating the risks in their business and be able to demonstrate to us that they are doing this. i realise that the parliamentary commission chaired by andrew tyrie was about banks and their record. but it raised an important theme that has to be considered more widely, namely that our approach to supervision of firms ensures that senior individuals are properly accountable and thus incentivised. the record of the banking crisis indicates that this senior accountability was not effective in banks that failed. often, the simplest points are the most powerful, and complexity is a poor guide. andrew tyrie and his colleagues have done a great service by making a simple but powerful bis central bankers ’ speeches point – as supervisors we must incentivise and hold to account those at the top, and not seek to do the job of management by influencing excessively further down. i could not end without talking about europe and solvency ii and wider global developments in insurance regulation. a month or two ago i ruffled a few feathers by criticising the cost and time taken preparing for a european directive that isn ’ t finalised. i have no regrets, because as public officials we have to speak honestly and transparently. i was making a point on behalf of firms because i feel strongly that you have been put to too much expense and time spent by management and boards. but, in saying this, i should be clear that the pra has not withdrawn from involvement in solvency ii, far from it. as tidjane said this morning, the insurance industry and its regulators cannot operate in a vacuum. this is why we continue to invest a large amount of our time engaging with our counterparts in europe as well as with the european supervisory authorities, the esas. we liaise closely with eiopa, the european insurance and occupational pensions authority. julian adams sits on the eiopa board of supervisors and management board and this gives us an opportunity to participate at a european level. a few weeks ago, eiopa reported on the critical issue of the long - term guarantees assessment and closed its consultation on proposals for preparatory guidelines. we now have acceptance that the classic matching adjustment is a prudent measure, which is hugely important for the uk life insurance industry. we know that many of you still have concerns around the restrictions built into the classic matching adjustment, particularly around the assets that can be used and the effect of possible downgrades in portfolios which are held for the long