It actually mandates that 8% of a bank’s liabilities must be bailed in before there can be any recourse to public money or industry financed resolution funds. However, the powers, and indeed the requirement to bail-in, are not enough in of themselves. Bail-in powers need something to work with once a resolution is triggered. For resolution to be effective, we need banks to hold sufficient debt structured in a form that can be safely and quickly bailed in – or, to give it its inelegant full name “Gone Concern Loss Absorbing Capacity” – G.L.A.C for short. There is now agreement on the broad objective for an international GLAC standard: it must allow for an orderly wind down of large, complex cross-border groups, whilst protecting its critical economic functions. Discussions have moved on to the key design features. What sort of standard? How much GLAC? What type of debt should count and where should it be located? On the quantity, I repeat, we are not seeking an amount of GLAC capable of resurrecting any failing bank including the global giants. Rather, we are looking for sufficient GLAC to recapitalise the entities carrying out critical economic functions to a level sufficient to regain and maintain market access. For the remaining entities, sufficient capacity to provide for an orderly run-off is what is required. On what kind of instruments should count as GLAC, the debt needs to be of a sufficient maturity to give confidence that the funding will not have been withdrawn before the bail-in can be executed.
Will Portugal need more help and will it receive it? The country was set back by the political uncertainty in the summer. This uncertainty has now been overcome and the country can and should take up from where it stood in the spring of this year, when it was able to successfully issue a long-term bond. Market confidence could be won back through a full implementation of the programme. That is why it is essential to keep to the existing programme and all its objectives. The debate on a second package is heard in Cyprus too. Not least because the collapse of the economy was worse than forecast. When can we expect “Cyprus II”? This question never ceases to amaze me. The Cyprus programme has not even been operating for six months and it has a duration of three years. I fail to understand why the question of a supplementary programme is already being raised. Cyprus must now implement the programme. There has been one review so far and that was successfully completed. The issue now is to continue the programme – nothing more. Not much has been heard about Slovenia recently. Will that country seek a rescue package if the ECB’s asset quality review exposes all the trouble in the banking sector? 2  BIS central bankers’ speeches  Slovenia is now conducting a separate stress test for the country’s ten major banks. The results will be available in late November or early December.