The Reserve Bank of New Zealand and the Government are working together on a policy to deal with the "too big to fail" problem. The policy will fulfil the twin objectives of ensuring that the cost of a bank failure rests on shareholders' and creditors' shoulders while also ensuring the bank remains open for business the day following its "closure".The policy called Open Bank Resolution is, in fact, a revival of a previously discussed, but not implemented, policy known as Bank Creditor Recapitalisation. OBR is a wider government initiative, but the technical aspects of the policy are being developed by the RBNZ.  Under OBR, a bank can open for full-scale or limited business on the day following its closure because of insolvency. It remains able to provide customers with full or partial access to their accounts and other bank services.The Government is keen to see the OBR implemented. It sees it as a permanent replacement to the deposit guarantee scheme that is due to expire by the end of 2011.Examples of such resolution mechanisms elsewhere include the US Federal Deposit Insurance Corp, the Canada Deposit Insurance Corp, the Special Resolution Regime in the UK and, more recently, the European Commission, for the European Union.The main feature of the OBR is that creditors are able to access a portion of their funds immediately after a bank fails, thus eliminating or minimising what has become a costly trade-off between protecting liquidity and enhancing market discipline. In essence, this reduces the risk that urgent liquidity concerns dictate how losses are allocated between shareholders, creditors and even government.The RBNZ is now seeking information from banks on their systems to determine the system changes necessary to ready core OBR elements. The RBNZ hopes banks will be prepared for the revised policy by 2012.