The Financial Stability Board (FSB) Plenary met in Basel to finalize the 2023 work program, which is expected to be published in January 2023. Additionally, FSB issued published a report that reviews progress in implementing resolution reforms and enhancing resolvability across the banking, financial market infrastructure, and insurance sectors. Furthermore, Annex 1 to the report sets out status of implementation of aspects of bank resolution regimes (as of September 2022); Annex 3 presents a summary table on rules, regulations, and guidance relevant to G-SIB resolvability; and Annex 4 provides a summary of selected cases of public assistance or resolution of banks in FSB jurisdictions.
The report on implementation of resolution reforms notes that resolution planning for global systemically important banks (G-SIBs) is maturing and the focus is shifting increasingly to fine-tuning and testing resolution preparedness. For G-SIBs, FSB has so far focused primarily on G-SIB resolution but, in 2023, focus will be on completing and consolidating work related to the unallocated Total Loss-Absorbing Capacity (uTLAC) and cross-border funding in resolution as well as on testing and making resolution plans fully operational. However, there may be banks other than G-SIBs that could be systemic in failure. Overall, a lot of progress in resolvability has been made in the banking sector; however, multiple challenges lie ahead and sustained progress requires the continued commitment of authorities and firms. For the banking sector, by end-2023, FSB will:
- finalize work on considerations on deployment of uTLAC resources.
- monitor (external/internal) TLAC issuance on the basis of public disclosures and publish a report.
- investigate further obstacles (for example, legal, regulatory, and operational) to cross-border funding in resolution, including in regard to the ability to mobilize collateral across borders.
- organize a workshop for authorities to share practices that facilitate use of resolution transfer tools and report progress.
- share members’ practices on home-host coordination and cooperation arrangements, playbooks, and exercises to test these arrangements via a report.
- assess, and publish a report on, the extent to which digital innovation in financial services could affect banks’ resolvability, resolution planning, and execution.
- discuss and share authorities’ practices on specific technical and cross-border issues of bail-in, including on cross-border recognition of related resolution actions.
- via a report, share experiences and lessons learned and explore potential challenges for G-SIBs on post-resolution issues, including legal and operational ones.
- conduct ninth Resolvability Assessment Process and report high-level findings by end-2023 (as part of the 2023 Resolution Report).
The FSB Plenary discussed the work program for 2023, including deliverables to India’s G20 Presidency. The main priorities for the FSB work include:
- intensifying the monitoring and analysis of financial stability issues.
- advancing work on the global regulatory and supervisory framework for crypto-asset markets and activities and enhancing crypto-assets monitoring framework to include decentralized-finance-specific vulnerability indicators and explore approaches to fill data gaps to measure and monitor interconnectedness of decentralized finance with traditional finance.
- strengthening cyber and operational resilience.
- enhancing the resilience of the non-bank financial intermediation sector and enhancing cross-border payments.
- enhancing central counterparty resilience, recovery, and resolvability.
- addressing financial risks from climate change, including work on the implications of transition plans from a financial stability perspective.
Keywords: International, Banking, Basel, Resolution Framework, TLAC, Regtech, Decentralized Finance, Cyber Risk, Operational Resilience, Crypto Assets, Climate Change Risk, ESG, Work Program, FSB
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