The aim, as I have said, is to enable the bank’s critical economic functions to continue, without taxpayer support, while it is being resolved. A great deal has been achieved. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  We now have agreed international standards covering the design of resolution regimes, the amount of ‘bail-inable’ resources banks must hold, and agreement with industry participants to ‘stay’ termination rights by counterparties in derivative and repo transactions if resolution is in train. Alongside this we also have international guidance on how to ensure continuity of access to FMIs as well as on the mechanics of executing a bail-in. The UK now has in place a comprehensive and effective bank resolution regime that implements the EU’s Bank Recovery and Resolution Directive (BRRD) and the international standards. The Bank of England has been established as the UK’s resolution authority with a wide range of powers to ‘bail in’ shareholders and creditors of failed banks. The biggest UK banks have begun to issue bail-inable debt at scale and are well on their way to meeting the target for loss absorbing resources in resolution. 7  Key policies and guidance to firms have been issued, notably on operational continuity and on the internal distribution of loss absorbing resources. Last October the Bank, with the publication of the Purple Book, the Bank set out in detail its approach to resolution and how it would tackle a failing bank.
Third, reduced technology sharing and collaboration will hamper the widespread adoption of best practices, thereby reducing efficiency and increasing costs. Fragmentation in the real economy will also have an impact on capital flows and financial markets. Geoeconomic fragmentation elevates financial market risk and disruption, as capital flows become more regionalised and less global. Consequently, this reduces market liquidity and returns and increases market volatility. The impact of disruptions in cross-border capital flows falls disproportionately on the less developed countries. In short, no country will emerge unscathed with rising geoeconomic fragmentation, with emerging market economies set to bear the brunt of reduced trade and capital mobility. In the last decade, emerging market financial assets benefitted from the rising tide of capital inflows that created a virtuous cycle of capital market reforms, deeper liquidity, and vibrant market development, which in turn drew in more capital inflows. The impact of a slowdown in capital inflows would be felt most acutely in those countries with the least developed capital markets and rely the most on foreign capital, putting them at risk of financial or balance of payments crises. Emerging markets that have already reached a more advanced stage of development, included in global indices, and run healthy external balances may be more resilient. LONG TERM: CLIMATE CHANGE  Perhaps the most significant financial risk for investors over the long term is climate change. This risk can materialise in two ways.