It is essential to emphasize that this requires a resolution process that does not, and should not, preclude actions to ensure that equity and bond holders lose all or most of the value of their assets, to an extent that depends on circumstances. And the ability to do this depends on the resolution processes for insolvent financial institutions.
In this context, the progress that has been made since 2008 in developing effective resolution mechanisms will play a key role in dealing with the too big to fail problem by significantly reducing the probability of a bank being too big to fail. This is a good point at which to turn to the regulation and supervision of the financial system.