That would help to provide some protection, beyond the DGS, for users of the monetary services that banks provide via overnight and short-term deposits; it could provide a small degree of protection against runs; and there could be an element of social justice in insulating, say, small firms and charities from the first line of loss. But, I say ‘some’ uninsured deposits because I am doubtful whether very large, wholesale deposits placed at term maturities (eg billions of pounds for six months or more) should be preferred. They are not monetary deposits, in the sense of being transaction balances; and they are not placed by households or small firms or charities. Moreover, if they were to be preferred, it would be likely that a chunk of bonded finance would over time morph into borrowing-instruments that had the legal form of ‘deposits’. That would increase the cost of any residual bond issuance. 9  See Tucker, P. M. W. (2009), The crisis management menu, “Too little attention was paid to core liquidity holdings: a treasury portfolio comprising the [Floating Rate Notes] issued by other banks does not leave a distressed bank with many options in the face of system-wide stress.”  10  Of course, if the DGS is bankrupt and a country’s government is bankrupt, the DGS may not be able to pay out. That is very serious, but it cannot be solved by the design of bank resolution regime.
This is a feature which is now missing in all of the Fund’s current lending facilities, and Third, since the remaining drawdown of the swaps is linked to a formal package of assistance that requires exceptional financing, Governments in the region, in a way, have pre-committed substantial amount of fund to be made available to support crisis resolution. In this regard, the IMF will only stand to benefit because part of the financing requirement will have already been shouldered by Governments in the region, thereby equipping the Fund with greater financial leverage to deal with other issues elsewhere. Let me now turn to other aspects of self-protection against future crises. On self protection through reserves accumulation, I think it is only proper that differentiation is made of the reasons for reserve buildup on a country-by-country basis. This is to say that one needs to assess whether the buildup is excessive with respect to that country’s overall level of exposure to the global financial markets, to its structure of exports and imports, and to the country’s overall level of external liabilities. On self-protection through the use of capital account measures, I welcome the fact that the Fund’s thinking on this subject has become more liberal. On occasions, it is appropriate to use capital account measures for crisis prevention.