FSB publishes G-SIB guidance
22 June 2018 London
Image: Shutterstock
The Financial Stability Board (FSB) has published two guidance documents to assist authorities in implementing its key attributes of effective resolution regimes for global systemically important banks (G-SIBs).
The guidance documents were issued for public consultation in November 2017 and have been revised in light of the comments received during the consultation, the FSB said.
The guidance will support the application of the overall policy framework to end “too-big-to-fail”.
The FSB said: “Bail-in within resolution is at the core of resolution strategies for G-SIBs, helping to achieve a creditor-financed recapitalisation.”
It said this is effected by way of a write-down and conversion of liabilities into equity that minimises impacts on financial stability, ensuring the continuity of critical functions and avoids exposing taxpayers to loss.
The guidance sets out principles to assist authorities as they make bail-in resolution strategies operational.
The principles cover disclosures on the instruments and liabilities within the scope of bail-in, valuations to inform and support the application of bail-in, processes to suspend or cancel the listing of securities, to notify creditors, and to deliver new securities or tradeable certificates following entry into resolution, securities law and securities exchange requirements during the bail-in.
It also covers processes for transferring governance and control rights to a new board and management for the firm emerging from resolution and communications to creditors and the market at large.
This second document covers the development of a resolution funding plan for G-SIBs.
The FSB said it builds on its August 2016 guiding principles on the temporary funding needed to support the orderly resolution of a G-SIB and existing supervisory and resolution guidance on liquidity risk management and resolution planning.
The guidance covers the capability of firms to support monitoring, reporting and estimating funding needs in resolution and executing the funding strategy.
In addition to the development of resolution funding plans by authorities, the reliance on firm assets and private funding as preferred sources of funding in resolution, access to temporary public sector backstop funding mechanisms and ordinary central bank facilities, as well as information sharing and coordination between authorities.
The FSB added that it is also currently seeking public feedback for a thematic peer review of bank resolution planning (the deadline for responses is 4 July).
The guidance documents were issued for public consultation in November 2017 and have been revised in light of the comments received during the consultation, the FSB said.
The guidance will support the application of the overall policy framework to end “too-big-to-fail”.
The FSB said: “Bail-in within resolution is at the core of resolution strategies for G-SIBs, helping to achieve a creditor-financed recapitalisation.”
It said this is effected by way of a write-down and conversion of liabilities into equity that minimises impacts on financial stability, ensuring the continuity of critical functions and avoids exposing taxpayers to loss.
The guidance sets out principles to assist authorities as they make bail-in resolution strategies operational.
The principles cover disclosures on the instruments and liabilities within the scope of bail-in, valuations to inform and support the application of bail-in, processes to suspend or cancel the listing of securities, to notify creditors, and to deliver new securities or tradeable certificates following entry into resolution, securities law and securities exchange requirements during the bail-in.
It also covers processes for transferring governance and control rights to a new board and management for the firm emerging from resolution and communications to creditors and the market at large.
This second document covers the development of a resolution funding plan for G-SIBs.
The FSB said it builds on its August 2016 guiding principles on the temporary funding needed to support the orderly resolution of a G-SIB and existing supervisory and resolution guidance on liquidity risk management and resolution planning.
The guidance covers the capability of firms to support monitoring, reporting and estimating funding needs in resolution and executing the funding strategy.
In addition to the development of resolution funding plans by authorities, the reliance on firm assets and private funding as preferred sources of funding in resolution, access to temporary public sector backstop funding mechanisms and ordinary central bank facilities, as well as information sharing and coordination between authorities.
The FSB added that it is also currently seeking public feedback for a thematic peer review of bank resolution planning (the deadline for responses is 4 July).
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