Addressing SIFIs – Implementation
The FSB has designated policy measures for systemically important financial institutions (SIFIs) as one of the priority areas for implementation monitoring. The task of regular monitoring and reporting in this area is carried out by the FSB in collaboration with standard-setting bodies.
The FSB published in November 2018 its fourth annual report on the implementation and effects of the G20 financial regulatory reforms. Below is an extract from this report on the status of implementation of too-big-to-fail reforms.
Processes for identifying G-SIFIs are in place.
Lists of G-SIBs are reviewed annually, while the BCBS recently published its revised assessment framework for G-SIBs.
The IAIS is developing a holistic framework to mitigate systemic risk in the insurance sector. In light of progress with that framework, the FSB, in consultation with the IAIS and national authorities, has decided not to engage in an identification of global systemically important insurers (G-SIIs) in 2018. The FSB will assess the IAIS’s recommendation to suspend G-SII identification from 2020 once the holistic framework is finalised in November 2019.1
The assessment methodologies for identifying non-bank non-insurer global systemically important financial institutions (NBNI G-SIFIs) will be finalised after the work on addressing structural vulnerabilities from asset management activities is completed.
Implementation of the policy framework for G-SIFIs has advanced the most for G-SIBs.
Implementation of Higher Loss Absorbency as well as of reporting and disclosure requirements for G-SIBs is proceeding on a timely basis (see section 2.1).
Supervisory frameworks have improved and supervisory colleges have been established for almost all G-SIBs. The effectiveness of colleges has improved since 2015 in terms of information-sharing, coordinated risk assessment and crisis preparedness. Yet challenges remain, including those related to legal constraints on information-sharing, supervisory resource constraints and expectation gaps between home and host supervisors.2
The level of compliance with the BCBS Principles on risk data aggregation and risk reporting is still to be improved and the overall implementation progress remains very limited. Most G-SIBs have found it challenging to comply with the principles and in 2017 they made, at best, marginal implementation progress.3 The BCBS will continue to monitor progress and has made additional recommendations to further promote their adoption.
Implementation of the TLAC Standard is ongoing. In most G-SIB home jurisdictions external TLAC requirements have been finalised (Canada, Switzerland, the UK and the US) or are close to being finalised (Banking Union, Japan).4 However, implementation of internal TLAC is less advanced and approaches to internal TLAC distribution and calibration differ among G-SIB hosts. Furthermore, few jurisdictions have introduced the BCBS requirements on cross-holdings of other G-SIBs’ TLAC or specific disclosure requirements for TLAC.
Substantial work remains in achieving effective resolution regimes and operationalising plans for systemically important banks and non-bank financial institutions (Graph 4).
Almost all G-SIB home and key host jurisdictions have in place comprehensive bank resolution regimes that align with the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions. However, implementation of the Key Attributes is still incomplete in some FSB jurisdictions. The powers most often lacking are bail-in (14 jurisdictions) and to impose a temporary stay on the exercise of early termination rights (9 jurisdictions). Reforms underway in several FSB jurisdictions address some, but not all, of these gaps.
Crisis Management Groups (CMGs) have been established, and resolution strategies and operational resolution plans adopted, for all G-SIBs. Despite the very substantial progress, important technical and operational aspects need to be addressed to make sure that resolution plans can be executed effectively. In addition, institution-specific cross-border cooperation agreements (CoAgs) are still not in place for some G-SIBs.5
Implementation of resolution reforms is less advanced in the insurance sector. The majority of FSB jurisdictions do not have in place comprehensive insurance resolution regimes that are aligned with the Key Attributes, and lack powers and tools needed to operationalise resolution plans.
Most jurisdictions do not yet have in place a comprehensive resolution regime for CCPs. Over the past year authorities began to establish CMGs for 13 CCPs identified as systemically important in more than one jurisdiction.6 CMGs and institution-specific CoAgs are not yet in place for all 13 CCPs and resolution planning for CCPs is still at an early stage.
Status of implementation
2 See the BCBS Progress report on the implementation of principles for effective supervisory colleges (December 2017).↩
3 See BCBS report on Progress in adopting the Principles for effective risk data aggregation and risk reporting (June 2018).↩
4 Firms that are currently headquartered in an emerging market economy and designated as G-SIBs will comply with the minimum TLAC requirements starting from 2025.↩
5 See the FSB Seventh Report on the implementation of resolution reforms (November 2018).↩
6 These CCPs were reported as systemically important in more than one jurisdiction by agreement between home and host authorities on the basis of a set of criteria set out in the FSB Guidance on CCP Resolution and Resolution Planning.↩