Crisis management and resolution
The FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions (“Key Attributes”) are the international standard for resolution regimes. They are part of the set of policy measures to address systemically important financial institutions that was endorsed by the G20 in November 2011 to address the problem of firms that are “too big to fail”. The aim of the Key Attributes is to make it possible to resolve any financial institution in an orderly manner without severe systemic disruption or exposing taxpayers to the risk of loss, by protecting the firm’s functions that are critical to the financial market or the real economy and ensuring that losses are borne by shareholders and creditors of the failing firm, as they would be in insolvency.
The Key Attributes set out the powers and tools that national resolution authorities should have at their disposal for firms in all financial sectors that could have a systemic impact if they fail. They also set out recovery and resolution planning requirements for all such firms and, in addition, require that Crisis Management Groups (CMGs) of home and key host authorities are set up to coordinate group-wide resolution strategies and plans for G-SIFIs. G-SIFIs are also subject to a regular high-level review of their resolvability through the FSB Resolvability Assessment Process.
The FSB has produced guidance on how the Key Attributes apply to resolution regimes for FMIs, insurers and firms that hold client assets, and on resolution strategies and planning to support the work of CMGs. It is working on other aspects of making resolution of large, complex firms feasible, including loss absorbing capacity in resolution for G-SIBs and cross-border effectiveness of temporary stays on early termination rights and of other resolution actions.
To promote implementation of the Key Attributes, the FSB carries out annual monitoring of the progress of FSB member jurisdictions in aligning national resolution regimes for all financial sectors with this international standard. It is also conducting a series of iterative peer reviews focussing on specific aspects of resolution regimes and different sectors. The main findings from these exercises are summarised in the annual FSB report on the implementation and effects of the G20 financial regulatory reforms.