Effective Resolution Regimes and Policies – Implementation
The FSB has designated resolution regimes 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 Resolution Steering Group (ReSG) and its subgroups, such as the Cross-Border Crisis Management (CBCM) groups for banks, insurers and financial market infrastructures. Their activities include monitoring progress and promoting the effective implementation in substance and scope of the Key Attributes of Effective Resolution regimes in the bank and non-bank financial sectors.
The FSB published in November 2020 its 2020 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 resolution-related reforms.
Implementation of the policy framework for global systemically important financial institutions has advanced the most for G-SIBs.
- Implementation of the Total Loss-Absorbing Capacity (TLAC) Standard continues. All relevant G-SIBs already meet the final 2022 minimum external TLAC requirements, and disclosure of external TLAC levels has improved over the past year. There is, however, little information available to market participants on TLAC distribution within groups.
Substantial work remains to operationalise resolution plans for systemically important banks and implement effective resolution regimes for insurance companies and CCPs.
- 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 and to impose a temporary stay on the exercise of early termination rights.
Crisis management groups (CMGs) continue to make progress on G-SIB resolvability. Resolution planning work by firms and authorities focuses in particular on the allocation of TLAC resources within groups; the estimation of liquidity needs in resolution and corresponding funding plans; operational continuity; and continuity of access to FMIs.
Implementation of resolution reforms is less advanced in the insurance sector, with no significant reforms reported over the past year.
Jurisdictions are still in the process of developing resolution regimes and cross-border cooperation arrangements for CCPs. Authorities have established CMGs for all CCPs identified as systemically important in more than one jurisdiction (S>1), with the exception of one CCP that was recently added to the group.1 Most authorities have commenced resolution planning for S>1 CCPs, but statutory resolution regimes for CCPs need to be completed in four of the 10 jurisdictions with such CCPs.
The powers and capabilities established over time to implement the Key Attributes have served authorities well during these times of stress.
- Resolution authorities have continued recovery and resolution planning consistent with the Key Attributes. CMG coordination and information capabilities have supported the monitoring of liquidity positions and more frequent and granular sharing of information.
Some authorities have taken actions to alleviate the burden on firms for reporting and for meeting certain requirements regarding resolution capabilities.
Implementation of Higher Loss Absorbency as well as of reporting and disclosure requirements for G-SIBs is proceeding on a timely basis.
The level of compliance with the BCBS Principles on risk data aggregation and risk reporting is still to be improved. Banks' efforts to implement the Principles have resulted in tangible progress in several key areas, including governance, risk data aggregation capabilities and reporting practices.
Status of implementation
For further information, see the latest FSB resolution progress report (as of November 2020).
1 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 (July 2017).↩