Moreover, the techniques normally used, such as a stay on payments, are ill adapted to banks. To supplement financial supervision and the deposit guarantee with a special insolvency regime, would not be adding an additional safety net to the benefit of depositors. It is quite simply a way of ensuring that the safety net protects those it was intended to protect but no others, and at a reasonable cost to the deposit guarantee system and society as a whole. But it should also be recognised that in situations where there is a threat to the financial system in its entirety, it may be needed to take partly different measures than in an ordinary bank failure. In these situations, the key focus must be on maintaining the vital functions in the interest of society as a whole. Perhaps the idea to have a partly different framework in these situations seems odd to you? After all, we normally expect the same legislative acts to apply regardless of the state of the economy or the situation in the financial system. But the situation is not unique. A similar situation exists in the health sector, where society has set up a framework to deal with our usual flus, broken bones and heart attacks. There  BIS Review 62/2008  5  are doctors and hospitals to deal with our problems. And there may be guidelines on how long sick leaves will be needed for a certain diagnosis.
Indeed, this gap in the regulatory framework has been demonstrated in the recent period of financial turbulence, where a number of countries have found it necessary to take extraordinary measures with regard to banks and other financial institutions in order to maintain financial stability. Today, I will try to sketch the broad features of such a resolution framework. In brief, it is a question of finding a system that makes it possible to close banks quickly and efficiently at a low cost to the deposit guarantee system, while making shareholders and uninsured creditors bear the responsibility for their investment decisions. But it must also allow for special measures to be taken in the exceptional situation where the failure of a bank risks destabilising the financial system as a whole. Also in such situations the government needs to have a strong negotiating position against the shareholders. But, first, how did I arrive at this conclusion? Well, from an analysis of the role of the banks in the economy and the safety net which has been built up around the sector. And from some  BIS Review 62/2008  1  experience from dealing with real crises. To get the right perspective, I think it is useful to start at this end. What is so special about bank failures? Bank failures have always been a problematic issue for governments.