Guidance on Financial Resources to Support CCP Resolution and on the Treatment of CCP Equity in Resolution

16 November 2020 | PDF full text (375 KB)

Summary of document history

Summary of document history

This report sets out guidance to support authorities in their assessment of the adequacy of financial resources for central counterparty (CCP) resolution and of the treatment of CCP equity in the context of resolution. Resolution authorities should conduct such assessment in cooperation with the CCP’s oversight and/or supervisory authorities. For CCPs that are systemically important in more than one jurisdiction, such assessment should be reviewed and updated on an annual basis and the results of such review/update be discussed within the firms’ crisis management groups.

Part I of the guidance proposes five steps to guide the authorities in assessing the adequacy of a CCP’s financial resources and the potential financial stability implications of their use. The authorities should:

  • Step 1: identify hypothetical default and non-default loss scenarios (and a combination of them) that may lead to a resolution of a CCP;

  • Step 2: conduct a qualitative and quantitative evaluation of existing resources and tools available in the resolution of the CCP;

  • Step 3: assess potential resolution costs;

  • Step 4: compare existing resources and tools to resolution costs and identify any gaps; and

  • Step 5: evaluate the availability, costs and benefits of potential means of addressing any identified gaps.

Part II of the guidance addresses the treatment of CCP equity in resolution. It provides a framework for resolution authorities to evaluate the exposure of CCP equity to losses in recovery, liquidation and resolution and how (where it is possible) the treatment of CCP equity in resolution could be adjusted.

Guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution: Overview of responses to the consultation

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Summary of document history

Summary of document history

On 4 May 2020, the FSB published a consultative document on Guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution. The FSB received 19 responses to the public consultation.

In addition, the FSB held two virtual outreach events on the draft guidance on 25 and 30 June. Participants included representatives of CCPs, clearing members, buy-side firms, legal experts and academia as well as public authorities.

This note summarises the main points from the responses, and provides an overview of the FSB’s reaction to those comments, including changes made to the guidance.

Guidance on Financial Resources to Support CCP Resolution and on the Treatment of CCP Equity in Resolution

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This report sets out guidance to support authorities in their assessment of the adequacy of financial resources for central counterparty (CCP) resolution and of the treatment of CCP equity in the context of resolution. Resolution authorities should conduct such assessment in cooperation with the CCP’s oversight and/or supervisory authorities. For CCPs that are systemically important in more than one jurisdiction, such assessment should be reviewed and updated on an annual basis and the results of such review/update be discussed within the firms’ crisis management groups.

Part I of the guidance proposes five steps to guide the authorities in assessing the adequacy of a CCP’s financial resources and the potential financial stability implications of their use. Part II of the guidance addresses the treatment of CCP equity in resolution. It provides a framework for resolution authorities to evaluate the exposure of CCP equity to losses in recovery, liquidation and resolution and how (where it is possible) the treatment of CCP equity in resolution could be adjusted.

Reprioritisation of the FSB work programme

13 November 2020

The FSB re-prioritised its work programme for 2020 to focus on responding to the pandemic.

The COVID-19 crisis calls for a reprioritisation of FSB initiatives to maximise the value of FSB work during the current crisis and to use members’ resources effectively.

The reprioritisation of FSB projects takes into account the following criteria:

  • whether the work is relevant to current crisis management;

  • whether the evolution of the crisis may substantially change the findings (and the analysis could therefore benefit from a delay);

  • whether there are other important reasons to maintain the existing timing and/or scope of the project; and

  • whether postponing or scaling back the work could relieve COVID-related additional resource pressures on FSB members and their staff and on financial institutions and other stakeholders.

The FSB will publish its 2021 work programme in December.

Implementation and Effects of the G20 Financial Regulatory Reforms: 2020 Annual Report

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The report finds that the G20 reforms after the 2008 financial crisis have served the financial system well during the COVID-19 pandemic. Greater resilience of major banks at the core of the financial system has allowed the system largely to absorb, rather than amplify, the macroeconomic shock. Bold and decisive actions by authorities sustained the supply of credit to the real economy and helped maintain global financial stability.

Given the pandemic, there has been limited additional progress implementing the G20 reforms during the last year. Regulatory adoption of several core Basel III elements has generally been timely to date, but there have been delays in implementing other Basel III standards. Substantial work remains to operationalise resolution planning for systemically important banks and to implement effective resolution regimes for insurers and central counterparties.

The FSB and standard-setting bodies (SSBs) have extended implementation deadlines for certain international reforms to provide additional capacity for firms and authorities to respond to the COVID-19 shock. In addition, authorities in many jurisdictions have taken regulatory and supervisory measures to alleviate the economic impact of COVID-19 on the financial system. 

The pandemic represents the first major global test of the post-crisis financial system, and an opportunity to examine whether reforms have worked as intended. The FSB and SSBs will carry out further work to identify potential lessons learned for international standards.

Furthermore, the COVID experience has demonstrated once again how interconnected the global financial system is. The FSB and SSBs will continue to promote approaches to deepen international cooperation, coordination and information-sharing, with the support of the G20.

The report includes a colour-coded dashboard that summarises the status of implementation across FSB jurisdictions for priority reform areas.

Implementation of reforms in priority areas by FSB jurisdictions (as of October 2020)

Implementation of reforms in priority areas by FSB jurisdictions (as of October 2020). Click for full size.

 

FSB publishes annual report on implementation and effects of financial regulatory reforms

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 47/2020

The Financial Stability Board (FSB) today published its 2020 report on the implementation and effects of the G20 financial regulatory reforms.

The report, which will be delivered to G20 Leaders ahead of their Summit next week, finds that the G20 reforms after the 2008 financial crisis have served the financial system well during the COVID-19 pandemic. Greater resilience of major banks at the core of the financial system has allowed the system largely to absorb, rather than amplify, the macroeconomic shock. Bold and decisive actions by authorities sustained the supply of credit to the real economy and helped maintain global financial stability.

Given the pandemic, there has been limited additional progress implementing the G20 reforms during the last year. Regulatory adoption of several core Basel III elements has generally been timely to date, but there have been delays in implementing other Basel III standards. Substantial work remains to operationalise resolution planning for systemically important banks and to implement effective resolution regimes for insurers and central counterparties.

The FSB and standard-setting bodies (SSBs) have extended implementation deadlines for certain international reforms to provide additional capacity for firms and authorities to respond to the COVID-19 shock. In addition, authorities in many jurisdictions have taken regulatory and supervisory measures to alleviate the economic impact of COVID-19 on the financial system. 

The pandemic represents the first major global test of the post-crisis financial system, and an opportunity to examine whether reforms have worked as intended. The FSB and SSBs will carry out further work to identify potential lessons learned for international standards.

Furthermore, the COVID experience has demonstrated once again how interconnected the global financial system is. close international cooperation is critical given the uncertainty about the pandemic, and necessary for the full, timely and consistent implementation of the reforms, which will help to further strengthen the resilience of the financial system. The FSB and SSBs will continue to promote approaches to deepen international cooperation, coordination and information sharing, with the support of the G20.

Notes to editors

This report includes an implementation dashboard that summarises, in a colour-coded table, the status of implementation across FSB jurisdictions for priority reform areas. The report also presents the main findings of the FSB consultative report on the evaluation on the effects of too-big-to-fail reforms for systemically important banks.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

The FSB is chaired by Randal K. Quarles, Vice Chairman, US Federal Reserve; its Vice Chair is Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

FSB virtual workshop on the use of supervisory and regulatory technology by authorities and regulated institutions

On 4 November the FSB hosted a virtual workshop to present its work on the use of supervisory (SupTech) and regulatory (RegTech) technology by authorities and regulated institutions. The workshop discussed market developments and financial stability implications raised in the FSB’s recent report on this topic .

2020 list of global systemically important banks (G-SIBs)

11 November 2020 | PDF full text (158 KB)

The 2020 list of global systemically important banks (G-SIBs) uses end-2019 data and an assessment methodology designed by the Basel Committee on Banking Supervision (BCBS).

Compared with the list of G-SIBs published in 2019, the number of banks identified as G-SIBs remains 30. The assignment of G-SIBs to buckets, in the list published today, determines the higher capital buffer requirements that will apply to each G-SIB from 1 January 2022. Three banks have moved to a lower bucket: JP Morgan Chase has moved from bucket 4 to bucket 3, Goldman Sachs and Wells Fargo have moved from bucket 2 to bucket 1. One bank has moved to a higher bucket: China Construction Bank has moved from bucket 1 to bucket 2.

FSB publishes 2020 G-SIB list

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 46/2020

The Financial Stability Board (FSB) today published the 2020 list of global systemically important banks (G-SIBs) using end-2019 data and an assessment methodology designed by the Basel Committee on Banking Supervision (BCBS).

The 30 banks on the list remain the same as the 2019 list.

FSB member authorities apply the following requirements to G-SIBs:

  • Higher capital buffer: The G-SIBs are allocated to buckets corresponding to higher capital buffers that they are required to hold by national authorities in accordance with international standards. Compared with the 2019 list, three banks have moved to a lower bucket (JP Morgan has moved from bucket 4 to 3 and Goldman Sachs and Wells Fargo have moved from bucket 2 to 1) and one bank has moved to a higher bucket (China Construction Bank from bucket 1 to 2).
  • Total Loss-Absorbing Capacity (TLAC): G-SIBs are required to meet the TLAC standard, alongside the regulatory capital requirements set out in the Basel III framework. The TLAC standard began being phased in from 1 January 2019 for G-SIBs identified in the 2015 list that continued to be designated as G-SIBs.
  • Resolvability: These include group-wide resolution planning and regular resolvability assessments. The resolvability of each G-SIB is also reviewed in a high-level FSB Resolvability Assessment Process (RAP) by senior regulators within the firms’ Crisis Management Groups. 
  • Higher supervisory expectations: These include supervisory expectations for risk management functions, risk data aggregation capabilities, risk governance and internal controls.

BCBS today published updated denominators used to calculate banks’ scores and the values of the underlying twelve indicators for each bank in the assessment sample. The BCBS also published the cutoff score used to allocate the G-SIBs to buckets, as well as updated links to public disclosures of all banks in the sample.

A new list of G-SIBs will next be published in November 2021.

Notes to editors

The requirements for G-SIBs summarised above are “higher” in the sense that they are additional to the minimum standards that apply to all internationally active banks under the Core Principles of the BCBS.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

The FSB is chaired by Randal K. Quarles, Vice Chairman, US Federal Reserve; its Vice Chair is Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.