From the point of view of the FSB, the possibility of conducting an orderly resolution of a failing cross-border financial institution is an important element in finding a solution to the “too big to fail” and “too big to rescue” issues. Effective communication between the relevant  2  BIS Review 167/2009  supervisory authorities as well as forward-looking elaboration of emergency procedures are indispensible in this process. Internationally recognised regulations for the dissolution of systemically important institutions that can be enforced under any jurisdiction are no doubt a splendid objective. In the real world, however, different national regulations will continue to exist in this field. From our point of view, reciprocal recognition of national regulations that are mutually compatible, and the associated adjustment of structures and processes, are a more realistic objective. The second element proposed by the FSB is to supplement the increased capital and liquidity requirements with various measures that address the organisational structures of systemically important financial institutions. Measures of this kind could, for instance, create the possibility of extracting operations that were important for the economy and liquidating the remaining operations. The third element in the solution envisaged by the FSB is a financial market infrastructure whose design ensures that, as far as possible, it minimises destabilising effects in the event of a bank collapse. Central counterparties can play a special role in this respect.
Given the particular importance of the banking sector, with two big banks which hold a key position in the domestic loan and deposit market, the “too big to fail” and “too big to rescue” issues have particular significance for Switzerland. Consequently, we need to be very conscious of the fact that measures may be needed over and above any international standard. For this reason we are dependent upon political support in order to make our financial system more resistant and more stable with regard to the “too big to fail” and the “too big to rescue” issues. If this succeeds, the competitive position of the Swiss banking sector will be reinforced in the long-term as a result of increased safety, reliability and credibility. The fact that the Swiss Federal Council has appointed a commission of experts on the subject of “too big to fail” is an important step, which we welcome. The willingness of the big banks to participate actively in elaborating solutions to the “too big to fail” and “too big to rescue” issues is also welcome. These latest developments clearly show how urgent the problems are. Ladies and gentlemen, if we do not manage to fundamentally reform the financial system, it is to be feared that a future crisis of even greater dimensions will trigger such a strong protectionist and regulatory reaction that the damage done will extend even to the market economy to which we owe our prosperity. We owe it to future generations to take action against this danger.