This concept of “no creditor worse off’’ (NCWO) is a central tenet of resolution regimes for banks. Resolution powers can interfere with property rights and the NCWO protection is needed to constrain use of these powers by the authorities. In the case of a bank, the test is that no creditor should be worse off than if the bank had gone into insolvency. For the reasons set out above, the insolvency counterfactual needs to be modified for CCPs; to assume that in insolvency the pre-agreed order of losses in the rule book would be followed. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  Non default losses  Finally, it is important to emphasise that I have been talking throughout about losses at a CCP following default of a clearing member. This, as I said at the outset, is the main vector of risk for a CCP. But it is not the only one. Non-default losses can arise for a number of reasons, particularly operational failures, including following cyber attack, or losses arising from the investment of the collateral held by CCPs. In such cases, CCPs do not generally have recourse to the resources of their members. Losses need to be absorbed by the capital of the firm and if that is insufficient the CCP faces insolvency like any other firm.
Jean-Pierre Roth: Central bank communication policies and the challenges posed by the financial crisis Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the presentation of the “BZ-Preis für Lokaljournalismus”, Berne, 27 November 2008. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  The financial crisis has prompted a rekindling of press interest in central bank operations, following a long period in which monetary authorities scarcely attracted any media attention. Our communication policy has thus been faced with new challenges in recent months. Today, central banks operate with the market, rather than “against the market”, as in the past. Financial market participants are therefore able to foresee central bank actions. Since the early 2000s, our communication policy has focused on transparency, and our experience with this has been positive. Thus, transparency increases the effectiveness of monetary policy. Yet, in the recent financial turbulence, transparency in monetary policy operations also turned out to be a double-edged sword, as communication problems arose. Indeed, there is a risk that operations to provide extraordinary liquidity assistance will impair the reputation of the recipient organisations, and thereby destabilise the market. There are a number of possible solutions with which a balance can be achieved between transparency and stability. BIS Review 147/2008  1