“ creative destruction ”. allan meltzer put an even finer point on it when he said : “ capitalism without failure is like religion without sin. it doesn ’ t work. ” with regard to banks that are deemed “ too big to fail ”, we therefore have to do away with the system that shields them at the taxpayer ’ s expense from the forces of “ creative destruction ”. to be clear, this by no means implies that we actually want banks to fail per se. but the threat of failure is a huge incentive for owners, creditors and other stakeholders to act prudently and with foresight. 3. from “ too big to fail ” to a well - functioning market economy to allow even large banks to fail we have to build a viable resolution regime. such a regime would allow these banks to fail without disrupting the entire financial system. they would be bis central bankers ’ speeches able to fail in line with market principles and in an orderly and predictable fashion. the ultimate ‘ entrepreneurial burden ’ would be shifted from the taxpayer to banks – and that is the right thing to do. at the european level, a common legal framework for resolution has been established by the bank recovery and resolution directive, or brrd for short. authorities now have a coherent set of instruments at their disposal for a smooth banking resolution process. the brrd also sets out a clear hierarchy for the bailing - in of owners and creditors. starting in 2016, bail - ins will become mandatory for failing institutions in the eu. bail - ins are in and bailouts are out, so to speak. however, given the global scope of the financial system, we ultimately need a global approach. consequently, the g20 have just agreed to a proposal on capital structure requirements for global systemically important banks. in particular, these banks will need to ensure a minimum amount of total loss - absorbing capacity, or tlac for short. this requirement may be as high as 20 % of risk weighted assets and must be at least 6 % of unweighted assets, which is twice the basel iii leverage ratio. it is essential that the tlac requirements are finalised on schedule by the end of this year so that they can enter into force by 2019. until then, much remains to be done. among other things, we have to develop rules on how to allocate internal tlac between local subsidiaries of banks in order to prevent ring - fencing. of course, the proposal should not be watered down

in the process. for instance, tlac instruments should be strictly subordinated to instruments not included in tlac in order to ensure transparency and legal certainty. we also need clear rules that restrict the holdings of tlac instruments by other banks in order to limit the risk of contagion. here, a number of potential approaches are currently under discussion. these include deductions from total capital, punitive risk weights and large exposure limits. 4. conclusion to sum up : many people blame untamed market forces for the financial crisis of 2008. i argue that it was, in fact, not too much market but too little that contributed to the nearcollapse of the financial system. a core characteristic of any well - functioning market economy was absent from the financial sector, namely the threat of failure. large banks operated with implicit government support that distorted their incentives for prudent behaviour and eventually cost taxpayers billions of euros. therefore, the regulatory reforms aim to reintroduce the principle of individual failure into the financial system. to reach this objective we have to establish mechanisms that allow banks to fail without disrupting the entire financial system. we have made significant progress both at the european and at the global level. and although we have not yet reached our objective, i am confident that we will eventually do so. thank you. bis central bankers ’ speeches