FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions. The report highlights the need for resolution preparedness and discusses lessons learned from the COVID-19 pandemic, which confirmed the importance of ongoing work on resolvability for banks, insurers, and central counterparties (CCPs). The report concludes that improved capabilities for monitoring the financial condition of firms and for cooperation and communication in a crisis, although not yet perfect, have served authorities well.
In the banking sector, the sixth round of the resolvability assessment process conducted during 2019-2020 confirmed that crisis management groups are broadly satisfied with the progress of global systemically important banks (G-SIBs) toward resolvability. 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. However, little information is available to market participants on the distribution of TLAC within banking groups. Work is ongoing on the management, distribution and transferability of these resources. The report identified some remaining obstacles to resolvability and gaps that to be addressed.
In the insurance sector, FSB continues to monitor implementation of the Key Attributes. Progress on implementation of national insurance resolution regimes has slowed down, with no significant reforms, such as finalization of new or enhanced insurance resolution frameworks, reported in this recent cycle. The FSB Key Attributes Assessment Methodology (KAAM) for the insurance sector, which was published in August 2020, may also be a useful tool for a jurisdiction that is adopting a new resolution regime or reviewing, reforming, or making improvements to its existing regimes. A number of jurisdictions have identified systemically important insurers for purpose 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. Furthermore, in the event of a 2022 decision to discontinue the global systemically important insurers (G-SIIs) list, FSB will review the scope of application of G-SII specific requirements in consultation with IAIS.
Central counterparties are also increasing in importance, given that the recent periods of market turmoil have demonstrated the benefits that central clearing brings for global financial stability. CPMI and IOSCO coordinated a review, which qualified thirteen central counterparties as systemically important in more than one jurisdiction. Some progress has been made in resolution planning for systemically important central counterparties in more than one jurisdiction. Authorities have established crisis management groups and commenced resolution planning for all central counterparties identified as systemically important in more than one jurisdiction, with the exception of one central counterparty that was added to the list of systemically important central counterparties in more than one jurisdiction in the August review. To support discussions on central counterparty resolvability and adequacy of financial resources for resolution, FSB recently issued a guidance on financial resources to support central counterparty resolution and on the treatment of central counterparty equity in resolution. FSB also developed, in 2020, a resolvability assessment process questionnaire that will be used for the first time in the 2021 for central counterparties that systemically important in more than one jurisdiction. Summary findings from the 2021 central counterparty resolvability assessment process will be included in the 2021 resolution report of FSB. The Chairs of FSB, CPMI, IOSCO, and the FSB Resolution Steering Group agreed to collaborate on and conduct further work on central counterparty financial resources through their respective committees.
Keywords: International, Banking, Insurance, FMI, COVID-19, Crisis Management Framework, CCPs, Resolution Planning, Resolution Framework, FSB
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
FED proposed three-year extension, without revision, of the information collection FR 4202, titled "Recordkeeping Provisions Associated with Stress Testing Guidance."
FCA updated the draft guidance for firms to ensure that mortgage customers whose homes may be repossessed are treated fairly and appropriately, particularly where there are risks of harm to customers who are vulnerable as a result of the COVID-19 pandemic.
FCA issued a statement on the cessation or loss of representativeness of the 35 LIBOR benchmark settings published by ICE Benchmark Administration or IBA.
EBA published a package that includes the final draft implementing technical standards on supervisory reporting and disclosures of investment firms.
BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.