I spoke on this subject last week, and the text is available on the Bank of England website, so I am not going to labour the point today. But the general principle is that resolution is a very information hungry activity. To give an example, the FDIC in the US has recently adopted a rule requiring deposit takers to provide detailed information on their derivatives positions within a 60-day period after being notified by the Authorities to do so. The rule was only introduced earlier this year but it will be worth considering a similar approach in the UK. Finally, there is a large missing piece to what I have said about the resolution regime, namely how it would deal with banks that operate with branches or subsidiaries in other countries, and likewise how foreign banks operating in the UK would be sorted out. There is now a great deal of attention on this issue, in the G20, in the EU and via the FSB working group on cross-border crisis management chaired by Paul Tucker, and rightly so. I think it is fair to say that the regimes in the US, Canada, Japan and the UK come closest at present to meeting a kite-mark standard, but more needs to be done in continental Europe. I therefore support the recent European Commission consultation calling for EU countries to adopt resolution regimes.
The first test that must be applied is to assess whether the public interest objectives could be met by implementing a rapid payout of insured deposits, or any other definition of deposits which the authorities wish to protect via a top-up extension of the deposit insurance scheme. The remainder of the bank would then be put through something known as the bank insolvency procedure. The test of whether this procedure could be used depends in large part on how long depositors would face without access to their funds. At the moment I think few banks could meet an acceptable timetable for payout. Moreover, for bigger banks this would always be too disruptive as an approach. Work is underway to facilitate rapid payout of depositors under the Financial Services Compensation Scheme and I hope that in the next year, banks will be able to meet the objective that they have been given by the FSA to be able to make payouts to depositors within seven days. This is not a trivial task as I readily recognise, and achieving it would not mean that this approach would always be chosen in a resolution. That depends on the situation at the time. If the failure of a bank is determined to have wider systemic consequences that could undermine financial stability, confidence in the banking system or depositor protection, then the SRR provides a range of other tools to be used.