Financial Resources and Tools for Central Counterparty Resolution: Consultation report
Effective resolution regimes for systemically important central counterparties (CCPs) and the availability of adequate resources and tools for CCP resolution remain critical for financial stability and ensuring confidence in the financial system.
In order for a CCP to be successfully resolved, there must be adequate financial resources and tools to support the CCP’s orderly resolution and to minimise adverse effects on financial stability. Accordingly, a lack of adequate resources or tools would likely prevent the resolution authority from achieving its resolution objectives and could lead to increased financial instability.
As part of the work on financial resources and tools for systemically important CCP resolution, the FSB conducted a qualitative analysis of a set of financial resources and tools for resolution: (i) bail-in bonds; (ii) resolution funds; (iii) resolution-specific insurance; (iv) resolution-specific third-party contractual support; (v) resolution cash calls; (vi) statutory or contractual variation margin gains haircutting (VMGH) for resolution; and (vii) equity in a first-loss position.
The resources and tools were assessed against the relevant considerations for financial resources set out in the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions(Key Attributes) and accompanying guidance on CCP resolution.
This report summarises the FSB’s analysis on the benefits and limitations of potential financial resources and tools for the resolution of systemically important CCPs.
The report sets out a proposed framework for resources and tools that should be available to the resolution authority in a CCP resolution. It proposes a “resolution toolbox”: a set of resolution-specific resources and tools to support the resolution of a CCP. The report outlines means for promoting implementation of the resolution-specific toolbox approach as a global standard.
The FSB invites comments on the report and accompanying questions. As part of its consultation, the FSB will host a virtual outreach event for stakeholders. Further details will follow shortly. Written responses should be sent to email@example.com by 20 November 2023 with the title “CCP resolution resources and tools”. Responses will be published on the FSB’s website unless respondents expressly request otherwise.