Andrew Bailey: Recovery and resolution plans Remarks by Mr Andrew Bailey, Executive Director for Banking Services and Chief Cashier of the Bank of England, at the Santander International Banking Conference, Madrid, 17 November 2009. I am grateful to Victoria Cleland, Chris Daniels, Iain De Weymarn, Andrew Hauser, Andrew Hewitt, Tony Lomas, Orla May, Maggie Mills, Sally Reid, Paul Tucker and Andrew Wardlow for their comments and advice. *  *  *  It is a pleasure to be in Madrid today, not least because finding time to reflect on the future of the banking system means that we are at some distance from the urgent fire-fighting that has characterised the past two autumns. But I would not wish thereby to downplay the importance and urgency of the rebuilding task. The past two autumns were in many ways taken up with doing what had to be done in crisis conditions. And what had to be done involved the use of public money on a scale that has been unprecedented and was previously unimaginable. There was nothing easy about that task, and from the perspective of resolving the problems of the system too often we have had to grit our teeth, accept that “we are where we are” and get on with the job in hand. Fire-fighters don’t get to choose the fires they fight, or even sometimes how they fight them. But fire prevention is better than fire-fighting.
And, the odds are that the cause of the next one will not be the same. I have been involved in mopping up problems in banks long enough to have been involved in Barings, which was an idiosyncratic fraud, not a sector-wide problem. This is the resolution element. In short, we need better fire prevention and better fire-fighting. In the UK we took a major step earlier this year by creating a Special Resolution Regime. But that is not the end of the response to the crisis. Rather, it is where “living wills” or what we now prefer to call Recovery and Resolution Plans, or RRPs, come in. I want to spend the rest of my time setting out what I think should be the role and form of these plans, and why they should be critical tools both for banks themselves, banking supervisors and resolution authorities. I have been struck by the strength of support for RRPs. In April, the G20 leaders endorsed a set of principles from the Financial Stability Board that include strong encouragement for firms to maintain contingency plans and procedures for use in a wind down, with regular reviews to ensure that they remain accurate and adequate. The Financial Stability Board cross-border Crisis Management Working Group, chaired by my colleague, Paul Tucker, has  BIS Review 156/2009  1  published principles aimed at strengthening the ability of authorities to deal with a crisis in certain cross-border financial groups.