We must be able to resolve institutions, no matter how large, in a way that preserves their remaining value while ensuring the costs are borne by shareholders and uninsured counterparties – and not by taxpayers. The effective resolution of insolvent, globally active banks will require clear rules for cross-border resolution.
It will also require new instruments and a range of other powers and tools, including an expanded capacity for bridge banks and clear recovery and resolution plans. Contingent convertible (CoCo) bonds and broader bail-in solutions can also be helpful in providing a kind of pre-packaged priority in bankruptcy.