The Australian Prudential Regulation Authority will require small approved deposit-taking institutions and insurance companies to develop living wills. The regulator has been working on its living will project over the past few months with a number of big banks, but it intends to apply the program more widely.Living wills are a regulatory response to the financial crisis. Strategically important financial institutions around the world must have plans in place to recover from severe stress, and if they are not able to recover they must have their affairs organised in a way that will allow the regulator to step in and resolve their situation cost effectively.APRA's chairman, John Laker, told the Finsia conference in Sydney yesterday that, while the development work on living wills was being done with large institutions, the concept had "much wider relevance".APRA is conducting a pilot with several large banks. The living will is in two parts: a recovery plan that sets out measures to raise capital and liquidity and sell assets; and a resolution plan.Laker said the institutions involved in the pilot would submit their plans by the end of the year. "We have asked for a menu of actions that would make a material difference," he said."In due course it will be extended to more approved deposit-taking institutions."This is not a nine-day wonder. Recovery plans will be a permanent part of what we do. It goes to risk management, capital adequacy and business structures."One of the issues APRA will look at is the complexity of the business structure. The business will have to be set up in such a way that parts of it can be sold separately.Laker said that since the emergence of the European sovereign debt crisis this year some institutions have argued that the reform agenda should be delayed."[But] nothing in our international engagement process suggests to us any weakening of the resolve of global policymakers to stay the course," he said."Policymakers will not acquiesce in the status quo. APRA will not be slowing down."