For the euro area I will say clearly: we need for cross-border banking institutions a European Resolution Authority, including or combined with a Resolution Fund, as well as a European Supervisor. This requirement is not only a necessity stemming from the high degree of interconnectedness among euro area banks, but  BIS central bankers’ speeches  5  constitutes also a major lesson of the present crisis. Indeed, some of the major imbalances that are besetting the euro area stemmed from uncontrolled behaviour of some banking sectors that eventually contaminated the sovereign. However, in the longer term, one can only envisage an integral EU resolution framework on a full EU basis, reflecting the highly integrated financial system in the EU. In parallel with the establishment of an EU resolution fund, we could gradually also start preparing to set up an EU-level resolution authority. Following a pragmatic approach, we could focus on the recently established Cross-Border Stability Groups. Common practical guidelines and blueprints could be prepared for them to foster a more harmonised approach for resolution across jurisdictions. With a more forwardlooking approach, on the basis of frequent peer reviews, qualitative assessments and stocktaking of best practices, we could gradually explore the possibilities of entering into more binding multilateral agreements within these groups, which in turn would pave the way for an EU-level authority. We should not forget that the supervisory reform process based on the De Larosière proposals is not yet finished. The review of the new EU supervisory authorities is scheduled for 2014.
Already today we are quite advanced in this regard, as there are 14 Crisis Management Groups for which EU authorities act as coordinators. These groups are truly global, involving authorities of numerous countries, ranging from Japan to Mexico. The issue of private financing is also addressed. The FSB standard states that jurisdictions should have in place privately financed deposit insurance or resolution funds, or a funding mechanism for ex post recovery from the industry of the costs of providing temporary financing to facilitate the resolution of a firm. Bail-in, a form of creditor-financed recapitalisation, is also an important element of the FSB standard. I consider bail-in as an apparently promising resolution tool. However, in many cases, in order to ensure the robust viability of the distressed bank after such a measure and to limit moral hazard, a bail-in mechanism will need to accompanied by a set of other restructuring (such as replacement of management) or resolution measures (like asset transfers, termination stays of contracts, segregation of troubled assets, bridge banks, etc... ) . For cross-border institutions, international cooperation to elaborate resolution plans and implement them, it would help if other measures would be adopted like enforceable  2  BIS central bankers’ speeches  netting agreements, segregation of clients positions and, specially, the move of OTC derivatives to central counterparties (CCPs) and to organised markets.