This is all about reducing the cost of resolution and thereby the risk to the stability of the system. Just like recovery plans, resolution plans need to be there to be used, and I can assure you that the Bank of England, in its role as a resolution authority, will be placing great emphasis on the existence of credible and useable resolution plans. They will be a tool for the authorities rigorously to ask  2  BIS Review 156/2009  the question, “With this structure and business model, could I achieve a resolution at an acceptable cost”. This will be true for domestic banks and for those operating across borders, and in the case of the latter there is a large amount of work to be done to ensure both complete coverage of resolution regimes and that they can work together. I have emphasised that I see RRPs as a device to enable tough questioning of structures and business models. I want finally to illustrate the sorts of questions that should arise by referring briefly to a couple of well known cases of the last two years or so. Let me start with Northern Rock, the first casualty in the UK and use this case to illustrate the role of a recovery plan.
It is therefore of course desirable that the extended repo-rate path is perceived as credible. As I mentioned earlier, it is possible that the extended repo-rate path with an unchanged repo rate further ahead would be perceived as less credible than a lower repo-rate path with a reduced repo rate now. In this case the effects are shown by the curves marked “Unexpected”. However, as the extended repo-rate path can be justified by the fact that it provides better outcomes for inflation and resource utilisation than the main scenario it may perhaps be perceived as being more credible, in which case the effects are shown by the curves marked “Expected”. 4  4  The effects of deviations from the repo-rate path of the main scenario on inflation, output and hours worked are calculated using the Riksbank's model Ramses with the methods described in Laséen and Svensson (2009) for expected deviations and Leeper and Zha (2003) for unexpected deviations. They are discussed in more detail in Svensson (2010c). The lower repo-rate path gives as an expected deviation (unexpected deviation in parenthesis) a largest increase in CPIF inflation of 0.42 (0.22) percentage points, in output of 0.33 (0.21) per cent and in hours worked of 0.35 (0.22) per cent. The extended repo-rate path gives as an expected deviation (unexpected in parenthesis) a largest increase in CPIF inflation of 0.48 (0.25) percentage  BIS Review 60/2010  5  Figure 2.