This is because it is inherently difficult for firms to predict which stress might tip them into failure. Firms will need to ensure that they are embedding robust assurance, governance and oversight arrangements within everyday processes so that they are always ready for the unpredictable. This is particularly important given that resolution is not something which we will have a second chance to deliver. Framing our approach around the three outcomes requires firms to think holistically and ask: “how will we be able to keep the business operating, while losses are borne by investors, and restructuring occurs?” This is more fundamental than just complying with individual policies or submitting data to authorities, and helps ensure that capabilities can be sustained for the long-term. We have also been flexible in our application of the RAF. In May 2020, in recognition of the operational burden on firms arising from the Covid pandemic, we extended the submission deadline for firms’ first reports by a year.19  19  See Statement by the Bank of England and Prudential Regulation Authority on resolution measures and Covid-19 8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  The RAF is also designed to be proportionate. I am quite conscious that I have dedicated a large chunk of my remarks focussing on larger banks and building societies – however being able to fail in an orderly way is a concept which speaks more widely than this – and is something which all firms need to take into account.
But we would, in my view, have had a much better chance of a more orderly, less damaging correction of an overleveraged banking system.” 5 Available here. 3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  The FSB highlighted that greater transparency would support the credibility of reforms already made, and that it would continue to encourage appropriate levels of disclosures on resolvability from authorities. The Bank led the way on efforts to increase transparency in the publication of its Approach to Resolution in 2014.6 A credible and transparent resolution regime is in firms’ interests, further increasing the resilience of the UK banking system by reducing systemic risk and giving the public and investors confidence that any failure, should it occur, will be orderly. To somewhat quantify this benefit: in December 2019 the Financial Policy Committee (FPC), of which I am a member, reaffirmed its 2015 judgement that effective resolution arrangements reduce the appropriate level of Tier 1 capital requirements by about 5 percentage points for the UK banking system.7  The benefit is quantifiable in market pricing too. The hidden subsidies given to the largest banks have been reduced; estimates of the value of these implicit subsidies to UK bank shareholders fell from c. £ in 2010 to less than c. £ at end-2016. This was also corroborated in the FSB Consultation Report, which noted that the funding cost advantages enjoyed by SIBs are negatively correlated with the degree to which resolution reforms have been implemented.