• Published on 18 November 2020
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FSB highlights need for resolution preparedness

The Financial Stability Board (FSB) today published its 2020 Resolution Report. The report updates on progress in implementing policy measures to enhance the resolvability of systemically important financial institutions and highlights the need for resolution preparedness. It also discusses lessons learnt from the COVID-19 pandemic, which confirmed the importance of ongoing work on resolvability, including for central counterparties (CCPs).

• Banks – Global systemically important banks (G-SIBs) are estimated to already meet the final 2022 minimum external total loss absorbing capacity (TLAC) requirement. TLAC-eligible bond issuance has continued through the difficult COVID-19 pandemic environment, and the market has so far absorbed issuance without difficulty. Disclosure of external TLAC levels by G-SIBs has improved over the past year. There is still however little information available to market participants on the distribution of TLAC within banking groups. Work is ongoing on the management, distribution and transferability of these resources.

• CCPs – Recent periods of market turmoil have demonstrated the benefits that central clearing brings for global financial stability. The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) coordinated a review, which qualified thirteen CCPs as systemically important in more than one jurisdiction. Most authorities have established crisis management groups for these CCPs and commenced resolution planning. To support discussions on CCP resolvability and adequacy of financial resources for resolution, the FSB issued Guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution. The Chairs of the FSB, CPMI, IOSCO and the FSB Resolution Steering Group agreed to collaborate on and conduct further work on CCP financial resources through their respective committees.

• Insurance – The FSB continues to monitor implementation of the Key Attributes for the insurance sector. Progress on implementation of national insurance resolution regimes has slowed down, with no significant reforms, such as finalisation of new or enhanced insurance resolution frameworks, reported in this recent cycle. A number of jurisdictions have identified systemically important insurers for purposes of recovery and resolution planning. Key areas of attention for FSB work on resolution planning for insurers are intra-group interconnectedness and funding in resolution.

Re-disseminated by The Asian Banker