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The Key Attributes set out the core elements of effective resolution regimes that allow authorities to resolve financial institutions in an orderly manner without taxpayer exposure to loss, while maintaining continuity of their vital economic functions.
The peer review examines the range and nature of resolution powers available to authorities for the banking sector in FSB jurisdictions, as well as any requirements for recovery and resolution planning and resolvability assessments for domestically incorporated banks. The main findings of the review are as follows:
Only a subset of the FSB membership – primarily home jurisdictions of global systemically important banks – currently have a bank resolution regime with a comprehensive set of powers broadly in line with the Key Attributes. The bank resolution powers that are most often lacking are explicit continuity powers, bail-in powers, and powers to impose a temporary stay on the exercise of early termination rights. The reforms underway in a number of FSB jurisdictions address some, but not all, of the gaps in bank resolution powers compared with the Key Attributes.
While resolution regimes generally apply to all types of commercial banks, the coverage of holding companies of banks, branches of foreign banks and material non-regulated operational entities within a financial group is more variable across FSB jurisdictions.
There is also significant variation across FSB jurisdictions in the conditions for the use of resolution powers and their level of detail.
More progress has been made in terms of putting in place processes for recovery planning compared to resolution planning or resolvability assessments. Only nine jurisdictions currently have explicit statutory powers to require banks to adopt appropriate measures to improve their resolvability.
The peer review makes a number of recommendations to FSB jurisdictions to address the identified gaps so as to fully implement the Key Attributes. These are:
By December 2016 jurisdictions will report to the FSB what actions they have taken, or plan to take (including implementation time frames), in order to address these gaps.
As a follow-up to another review recommendation, the FSB will provide additional clarification and guidance in certain areas to assist jurisdictions in effective and consistent implementation of the Key Attributes, and to enhance, in collaboration with international financial institutions and other bodies, the sharing of experiences and practices on resolution regimes.
Ravi Menon, Managing Director of the Monetary Authority of Singapore and Chairman of the FSB’s Standing Committee on Standards Implementation (SCSI) that oversaw the preparation of the peer review, said “Resolution reforms are a critical component of the policy framework for addressing the too-big-to-fail problem. Continued rigorous monitoring is needed to promote full and consistent implementation of these reforms to safeguard financial stability.”
Fernando Restoy, Deputy Governor of the Bank of Spain and Chair of the peer review team on resolution regimes, said “Progress continues to be made in strengthening bank resolution regimes in FSB jurisdictions. But the report highlights that substantial work remains to put in place a full set of resolution powers and recovery and resolution planning requirements. Authorities must intensify their efforts to implement fully the Key Attributes.”