redemptions to CBRT)  -14.8  Redemption of net TRY government bonds (redemption-issue)  18.9 -28.9  Primary surplus inflow TRY denominated operations  privatizations  and  other  -4.8  Accordingly, while the Central Bank’s foreign exchange purchases and interest payments boosted liquidity by TRY 11 billion in 2008, the Treasury’s operations amounting to TRY 14.8 billion and the TRY 10.5 billion increase in monetary base eroded liquidity by a total of TRY 25.3 billion. Significant uncertainties exist regarding liquidity conditions in 2009. The reason is that the Central Bank’s foreign currency purchase/sale operations against TRY and the Treasury’s net foreign exchange collections or payments are not yet clear, and the realizations can also be different from the envisaged within the year. Under the assumptions that the Central Bank will not conduct foreign currency purchase/sale operations against TRY and that the Treasury will act as net foreign currency payer at a reasonable level, it is predicted that though the liquidity shortage in the market will be at moderate levels throughout the first quarter, it will be gradually permanent from the second quarter onwards. If the Central Bank sells foreign exchange against TRY, a permanent liquidity shortage might emerge earlier than expected. On the other hand, in case the re-commencement of FX buying by the Central Bank due to improved conditions in international markets or the utilization net FX inflows of the Treasury in terms of TRY might hinder occurrence of permanent liquidity shortage.
This is because it is inherently difficult for firms to predict which stress might tip them into failure. Firms will need to ensure that they are embedding robust assurance, governance and oversight arrangements within everyday processes so that they are always ready for the unpredictable. This is particularly important given that resolution is not something which we will have a second chance to deliver. Framing our approach around the three outcomes requires firms to think holistically and ask: “how will we be able to keep the business operating, while losses are borne by investors, and restructuring occurs?” This is more fundamental than just complying with individual policies or submitting data to authorities, and helps ensure that capabilities can be sustained for the long-term. We have also been flexible in our application of the RAF. In May 2020, in recognition of the operational burden on firms arising from the Covid pandemic, we extended the submission deadline for firms’ first reports by a year.19  19  See Statement by the Bank of England and Prudential Regulation Authority on resolution measures and Covid-19 8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  The RAF is also designed to be proportionate. I am quite conscious that I have dedicated a large chunk of my remarks focussing on larger banks and building societies – however being able to fail in an orderly way is a concept which speaks more widely than this – and is something which all firms need to take into account.