Admittedly, it is not always simple to know exactly where the line should be drawn between these two purposes. But if the guidelines are clear enough it should be up to the supervisors in each country to make sure that this line is respected, and if need be to oblige banks to reorganize their activities. This is the philosophy which was the basis of the Liikanen Report and hopefully it will prevail. EUROWEEK: And if things do go wrong is it fair to have a bail-in regime where debt investors bear their share of the losses? 4  BIS central bankers’ speeches  Noyer: Bail-in is an important concept. We discovered during the crisis that if all stakeholders are not eventually obliged to take part in the cost of restructuring a bank if necessary, the consequence might be that the taxpayer has to foot the bill, which is not fair , although it can be necessary in extreme circumstances. The other consequence is that banks are forced into fire sales of assets, which means the prices they command are very low and their losses are maximised. The result is either that the bank is pushed towards bankruptcy if the state allows it, or has to be supported using taxpayers’ money and possibly having them bearing the losses, which as I said before is not right.
So the IMF has simply observed that France can’t afford to stand still when Germany began to reform some years ago, and given that the southern European countries are also moving to address the problems of cost competitiveness and rigidities. This is clearly why the  2  BIS central bankers’ speeches  economic reforms announced in France are so important. I’m delighted that the government has made this such a high priority. EUROWEEK: Let’s move on to France’s relationship with the financial markets and with the developments in its banking system. Are you concerned about what the ratings agencies have been saying about France? Or are ratings agencies irrelevant these days? They don’t seem to have had much of an impact on France’s borrowing costs. Noyer: No. I don’t worry about ratings agencies. The crisis led to a weakening in public finances in most countries, so in relative terms there have been few changes in their ratings. No agency is denying that France still has one of the strongest risk profiles in Europe. The second reason why I don’t worry is that worldwide authorities such as the G20 and the FASB have said very clearly that they want market players to rely less on credit ratings agencies and to make their own judgments. This can be done by banks’ internal models or other types of analysis by investment managers which are more sophisticated than they used to be a few years ago.