5  Eg, public interest pre-conditions for the use of resolution tools; compensation if creditors bear losses beyond what it is estimated they would incur in insolvency; an independent process for valuing potential compensation, etc. BIS central bankers’ speeches  3  The critical difference from a standard corporate reconstruction is that for banks and dealers there is not time for a negotiation lasting a month or so under the control of a judge. In the wider public interest, swifter action is needed to stabilise banks, executing a resolution strategy designed to contain the impact on stability in the financial system as a whole. Bailin seeks to deliver that. Such bailins do, of course, impose losses on creditors. But all – I repeat, all – resolution tools involve creditors and the Deposit Guarantee Scheme, as well as equity holders, taking losses. As this audience certainly knows, that is not an exotic proposition. The losses simply have to go somewhere. There is, however, a difference between ‘bailin’ and other resolution tools. Under most traditional bank-resolution techniques – L&P or P&A – losses for uninsured creditors , including the DGS, are revealed only at the end of the administration of the rump, when all assets have been sold or run off. ‘Bailin’ works by making an ex ante, up-front judgment of the scale of expected losses, and by reconstructing the capital structure accordingly, without the destruction of value entailed by winding down all portfolios associated with non-critical services.
those which the Bank’s analysis identified as being systemically important to the CHAPS system in terms of the total value of payments they send and receive. 5  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  5  the first non-bank PSP to join CHAPS directly. Direct access allows non-bank PSPs to reduce their operational dependence on the banks they are trying to compete with. Over the longer term, this should also create a more diverse payments sector with fewer single points of failure. Reducing the cost of access. We continue to seek to avoid the costs of direct access being prohibitive to prospective and existing participants. We have enabled third-party aggregators to provide technical connectivity to RTGS for smaller CHAPS direct participants, reducing the upfront costs of direct access without reducing overall resilience. The RTGS Renewal Programme will further reduce the barriers to direct access. Its technical architecture will be designed to support several hundred Direct Participants in CHAPS; allowing for a significant increase from the current 33. We also intend to introduce automated testing to streamline the joining process. We will build simulators to help new joiners better familiarise themselves with CHAPS and provide broader RTGS functionality before going live. The renewed RTGS will also feature enhanced functionality (e.g. enhanced liquidity management and the capability to extend opening hours), facilitating innovation by both established participants and new joiners.