of banks that are “ too big ” or “ too interconnected ” to fail. if we are committed to a market - based system, the financial system of the future must expose financial institutions of all sizes and structures to the ultimate test of the market place. the very definition of a market economy is that it must allow for failure as a sanction of excessive risk taking or managerial incompetence. in the event that large, systemically relevant financial firms face the threat of failure in a next crisis, the financial system of the future must allow for their orderly resolution. such a system needs to ensure that failure of a large bank does not have serious negative consequences for the provision of financial services to the real economy. there are several possible routes to achieve this goal. we need to examine all the available options with an open mind. the optimal policy is likely to combine different elements. as i explained in the introduction to this speech, here in switzerland the problem of “ too big to fail ” is particularly pronounced. accordingly, the finma and the snb are jointly evaluating different avenues. the two big banks are now closely involved in this work. we welcome their active engagement. at the international level, the fsb and its member bodies are also addressing this problem at the request of the g20 leaders. ladies and gentlemen, it is imperative that a real solution to this problem be found. at the forefront of our efforts to mitigate the “ too big to fail ” problem must be an internationally agreed and orderly process to allow for the wind down of large, systemically important financial institutions in the event of a severe crisis. obviously, there are many technical and legal problems that have impeded any meaningful progress in reaching international coordination in this matter. but what has been missing is a bold and international political commitment to put in place a framework for the orderly resolution of large cross - border financial institutions. provided we have such an unequivocal commitment, solutions will eventually emerge. needless to say, we must accept the reality that different national resolution regimes will continue to coexist. let me be very clear on this : a full - fledged global resolution regime is a noble but seemingly unrealistic goal. we should not conclude from that, however, that the framework for cooperation across countries cannot be improved. one possibility is to work towards mutual recognition arrangements of compatible national resolution regimes. recognising other resolution regimes helps each nation to adapt its own structures and processes in order to reduce friction

than monetary policy. legislative and constitutional steps are necessary and they are currently under way. it is important to have them in mind because they may hold a few surprises. 3. the political process 3. 1 first stage : demonetisation of gold the first stage, which aims at demonetising gold, is already well under way. the demonetisation of gold required two legal adjustments : • • a revision of the swiss constitution a revision of the current coinage act. on 18 april 1999, the swiss voters approved a total revision of the constitution. in this revision, the requirement that a certain percentage of banknotes be backed by gold was removed. the abolition of this requirement constitutes the first step in the dismantling of the old order based on the gold standard. the new constitution will enter into effect on 1 january 2000. in the course of the next few months the swiss parliament will debate on the revision of the federal coinage act, which will henceforth be known as the federal law on currency and payment instruments. the coinage act vested the right to fix the gold parity of the swiss franc in the federal council. in future, no reference will be made to a gold parity. in this respect, too, one of the chief characteristics of the gold standard will disappear. parliament is expected to pass the new federal law on currency and payment instruments before the end of this year. the law will enter into force in spring 2000 unless, in the meantime, 50, 000 citizens would request for a referendum on the subject. if a referendum is to be held, it would probably take place in autumn 2000. to my mind, however, the probability that signatures will be collected for a referendum is slight indeed. i am fairly confident that the new law will enter into effect in spring 2000 without delay. by the time the law on payment instruments will be in place in early 2000, gold will have been demonetised. the snb will be allowed to evaluate its gold holdings at their market price, and a revaluation surplus will appear on our balance sheet. technically, the snb will also be able to buy or sell gold on the market. 3. 2 second stage : transfer of excess reserves the recently revised constitution and the new federal law on currency and payment instruments are not sufficient as a legal basis for allowing the national bank to transfer excess reserves for external use. a special constitutional basis must be created for this purpose and then specific legislation will have to allow the realisation of concrete