1  Such liquidity may be secured against a wide range of collateral, building on the collateral eligible in Sterling 2  Monetary Framework operations. The Bank’s objective would be to provide liquidity in sterling or foreign currency as required, in the necessary scale and for a sufficient period of time to allow the firm to make the transition to market-based funding. The terms would be set in a way designed to support the effectiveness of the resolution regime, incentivise the transition of the firm back to market-based funding, and protect public money. Confidence in the regime for the resolution of international banks is of crucial importance to the UK. We are home to a number of major international banking groups. But equally, if not more important, we are host to a very large number of foreign banks, many of which have sizeable wholesale market operations in the UK. As the leading international financial centre, we import considerable risks from other jurisdictions. It is therefore crucial to financial stability in the UK that we can rely on foreign banks operating in our jurisdiction having viable resolution strategies in line with international standards. Absent such assurance, we would need to ensure the entities operating here have greater resilience locally. Non bank resolution  It was the failure of systemic banks in the crisis that exposed the lack of an effective resolution regime.
And we have established crisis management groups, and, in the EU, resolution colleges, that bring together the regional supervisors for the major cross border banks. These provide the mechanism for agreeing, in advance, the strategy for managing the failure of a major bank with a presence in a number of jurisdictions and for monitoring progress in making that strategy possible. This requires the continued build up, in line with the agreed international standard, of loss absorbing resources that can be used to recapitalise the group in resolution. And hosts’ confidence in the resolution strategy will depend on the contractually enforceable allocation of those resources across the groups major operating entities, again in line with international standards. Recapitalising a bank in resolution by bailing in the private sector restores solvency. But a solvent bank in resolution will still have liquidity needs. Our first preference – and that of the resolved firm – would be for the bank to meet those needs from some combination of its own liquid assets and private funding sources. But we cannot guarantee resolved firms will be in this position, even once they have been restored to solvency and are continuing to meet the requirements for authorisation. Ensuring solvent firms in resolution have access to public sources of liquidity is therefore a critical part of an effective resolution strategy and an area where there is great merit in clarity.