Such a system needs to ensure that failure of a large bank does not have serious negative consequences for the provision of financial services to the real economy. There are several possible routes to achieve this goal. We need to examine all the available options with an open mind. The optimal policy is likely to combine different elements. As I explained in the introduction to this speech, here in Switzerland the problem of “too big to fail” is particularly pronounced. Accordingly, the FINMA and the SNB are jointly evaluating different avenues. The two big banks are now closely involved in this work. We welcome their active engagement. At the international level, the FSB and its member bodies are also addressing this problem at the request of the G20 leaders. Ladies and Gentlemen, it is imperative that a real solution to this problem be found. At the forefront of our efforts to mitigate the “too big to fail” problem must be an internationally agreed and orderly process to allow for the wind down of large, systemically important financial institutions in the event of a severe crisis. Obviously, there are many technical and legal problems that have impeded any meaningful progress in reaching international coordination in this matter. But what has been missing is a bold and international political commitment to put in place a framework for the orderly resolution of large cross-border financial institutions. Provided we have such an unequivocal commitment, solutions will eventually emerge.
Mervyn King: Monetary policy developments Speech by Mr Mervyn King, Governor of the Bank of England, to the Birmingham Chamber of Commerce Annual Banquet, Birmingham, 23 January 2007. *  *  *  Lord Mayor, Lady Mayoress, President, Distinguished Guests, Ladies and Gentlemen, Two weeks ago your Chamber of Commerce called on the Bank of England to take manufacturing more seriously when it sets interest rates. In arguing against an interest rate rise, the Birmingham Chamber said, “we would urge the Bank of England to once again consider the effects this will have on the beleaguered manufacturing sector”. It will not have escaped your attention that Bank Rate did rise in January and has now increased by 75 basis points since the beginning of August. So tonight I want to explain why the Monetary Policy Committee took that action, and why the Bank believes that the control of inflation is essential for the success of Birmingham – and all British – manufacturing. Last week we learnt that inflation, as measured by the Consumer Prices Index, was 3% in December, the highest level since the Monetary Policy Committee was set up almost ten years ago. If it rises by one further decimal point to 3.1%, I shall have to write an open letter to the Chancellor explaining why inflation has risen to more than one percentage point above the target of 2%, and what measures the Committee are taking to bring inflation back to target.