11  All speeches are available online at www.bankofengland.co.uk/speeches  11  One can make the point, albeit with an absurdly extreme example, by imagining that the only thing a sceptical outside observer can see is whether or not there has actually been such a problem. We’re interested in how long it would take, possessing only this information, to conclude that the likelihood of such an event had changed. The precise answer depends on what one means by “conclude” and how sure the observer is of her prior belief12. But imagine, for illustration, that after a relatively long period with several such episodes, our observer’s best guess is that the per-annum chances of a serious problem in the financial system are 8% – she expects it to happen only once every 12½ years, on average (I’m thinking of something less severe and less infrequent than the “once-in-a-century” financial crisis of 2008). What she doesn’t know is that, thanks to some beneficial piece of prudential legislation, the  Chart 9: Learning about rare events takes a long time  likelihood has actually fallen to 4% a year. Chart 9 shows how her estimate of the probability is likely to evolve over time. Because these events are rare this happens only very slowly.
Whether for market counterparties, central banks or backstop providers, lending decisions are much easier to contemplate where solvency is assured in the operating entities that need funding. Work in FSB to date has concentrated on what is necessary to stabilise G-SIBs at the point of entry to resolution, whether changes to firms to make them resolvable - like TLAC and operational continuity requirements - or to market contracts and conventions - like the ISDA Protocol or access to FMIs. But bail-in is not the end of the task. It is a prelude to whatever reorganisation is necessary to restore a firm to viability or to wind it down. Importantly though bail-in buys the time for that process to be orderly. Post bail-in restructuring runs as a thread through some of the other initiatives I have mentioned. It is part of the operational continuity principles. And, as part of the access to FMI work we are keen to investigate how easy it would be in resolution to dismantle the quasiFMI functions – payment services, clearing and custody – provided by G-SIBs to clients, financial and non-financial. However easy or difficult it is to transfer or wind-down services provided by a G-SIB, clients may have contingency providers themselves or may want to rely on the portability of their positions to move. If they are to move we need to find a way for that to happen in an orderly way. Post bail-in restructuring is also where ring-fencing of UK banks fits in.