Why do I say this, when we have other resolution tools available? I say this because of the importance of protecting critical  1  http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2014.173.01.0190.01.ENG  BIS central bankers’ speeches  1  functions. It is simply not credible to think that a G-SIB could be dismantled over a resolution weekend without a destabilising disruption to critical functions. Finding a private sector purchaser capable of taking on the business – in whole or in parts – is likely to be even more difficult. Bail-in enables us to stabilise a firm. It buys the time that will allow for an orderly reorganisation or wind down of all or part of a failing firm, in order to address the underlying cause of the failure. There is more than one way to effect a bail-in: either through the use of write-down and conversion powers directly, or via a bridge institution. In a bridge, liabilities are exposed to loss by leaving them behind in an insolvency process with the activity that is to continue transferred to a new legal entity. In contrast, where the bail-in tool is applied directly, liabilities are written down or converted into equity within the existing legal entity. Applying the bail-in tool directly has a number of advantages over the bridge approach, at least in the context of a resolution at the level of an operating company.
None of these changes is obvious, to say the least, but none should be taboo. II. Supervision: lessons from an active euro area model Fair enough about implementing Basel III; but then comes the next suspicion: Credit Suisse failed despite being Basel III compliant. The answer is clear: good regulation is necessary; it's never sufficient. The risks generated by specific business models such as the asset-liability mismatch at SVB or the weak profitability and weak internal controls that dogged Credit Suisse should typically have led to higher supervisory requirements. Supervision should not be seen as a static business; it must be active and tailored to banks characteristics. This is precisely the spirit of the "Pillar 2" in the Basel framework, with the annual Supervisory Review Process. I sometimes hear doubts about supervision, which some believe should be treated as a legal dialogue, cautious in its form, and slow in its effects. No: supervision can and must be intrusive – including on-site –, exercised by highly skilled practitioners, quick in its reaction, strong in its powers. This is not wishful thinking: it has been our experience for decades in the French ACPR, and now for years in the European SSM. Active supervision is indeed one of the great successes of our European Banking Union. In light of the recent reality test, I believe there are two lessons to be learnt from our model.