Featured Product

    FSB Discusses Bail-In Practices and ML/TF Risk Assessment Framework

    December 13, 2021

    The Financial Stability Board (FSB) published a paper on practices on the execution of bail-in, which is at the core of resolution strategies for global systemically important banks (G-SIBs). In addition, FSB published an IMF-World Bank report that proposes a draft framework and methodology for assessment of money laundering/terrorist financing (ML/TF) risk in remittance corridors that have the potential of being identified as “safe remittance corridors." The Committee on Payments and Market Infrastructures (CPMI) also published new data on the trends in correspondent banking, based on end-2020 data from over 200 countries and jurisdictions. The data show that cross-border payment volume and value increased by 2% and 7%, respectively, in 2020. However, correspondent banking relationships declined by 4% from the previous year, taking their total contraction to about 25% between 2011 and 2020.

    Bail-in, which is an important tool set out in the Key Attributes of Effective Resolution Regimes for Financial Institutions, is intended to enable an orderly resolution that minimizes any impact on financial stability and ensures the continuity of critical functions, without exposing taxpayers to loss. Since the adoption of the FSB Principles on Bail-in Execution, resolution planning has progressed and authorities have developed approaches and practices in accordance with their respective jurisdictions’ legal frameworks, securities law, and exchange requirements. Drawing on examples and practices across different jurisdictions, the paper on bail-in provides an overview of practices, operational processes, and arrangements as part of the bail-in process. This includes the suspension of trading and delisting from trading venues of securities of bailed-in firms; the (re-)listing and (re-)admission to trading of new and existing securities; and the role central securities depositories (CSDs) play in the cancellation of shares, write-down and/or conversion of eligible instruments, and issuance of new shares and interim instruments. The paper also highlights cross-border challenges to the execution of bail-in, where securities are listed on more than one trading venue across different jurisdictions or where securities are issued in a market other than the domestic market. These include the suspension of trading and settlement across all relevant trading venues and CSDs; the distribution of the new securities in foreign markets or to foreign investors; and operational challenges arising for example from the involvement of multiple CSDs. These issues introduce additional complexities to the execution of bail-in, which may need to be specifically addressed as part of resolution planning. FSB will continue to facilitate the sharing of practices among authorities and efforts to address these issues, including by continuing its engagement with stakeholders as part of the work of its Resolution Steering Group and Bank Cross-Border Crisis Management Working Group.

    The draft framework on ML/TF risk assessment, by IMF and World Bank staff, contributes to the FSB Roadmap for Enhancing Cross-Border Payments, which the G20 Leaders endorsed in 2020 and that aims to achieve faster, cheaper, more transparent, and more inclusive cross-border payment services. The draft framework for remittance corridors’ risk assessments is the first action under Building Block 7, the goal of which is to promote “safe payment corridors,” and which has two phases. The first phase involves the development of a framework and methodology for the assessment of the money laundering and terrorist financing (ML/TF) risks in remittance corridors and the identification of potential “lower risk corridors,” as part of or consistent with a country’s national ML/TF risk assessment. In the second phase, the proposed framework is expected to be piloted in some corridors with a view to testing and further refining the assessment methodology. This assessment framework can be applied jointly or separately by the sender and the recipient corridor countries. The objective of a corridor risk assessment is assessing and understanding the ML/TF risks of remittances in a corridor, with the aim of simplifying AML/CFT measures in lower risk remittance transactions. If the corridor risk assessment assesses that the overall ML/TF risk level in the corridor is lower, the corridor can be treated as a “safe remittance corridor” and subject to simplified customer due diligence measures by regulatory authorities, which can be implemented by the private sector.


    Related Links

    Keywords: International, Banking, Insurance, Securities, FMI, Resolution Framework, Crisis Management Framework, Resolution Planning, Basel, G-SIBs, Systemic Risk, Financial Stability, Bail-In, ML/TF Risk, AML/CFT, Customer Due Diligence, Lending, Cross-Border Payments, Remittance Corridors, Key Attributes, Correspondent Banking, CPMI, FSB

    Related Articles

    UK Authorities Consult on Implementation of Basel 3.1 Standards

    The UK authorities have published consultations with respect to the Basel requirements for banks. The Prudential Regulation Authority (PRA) published the consultation paper CP16/22 on rules for the implementation of Basel 3.1 standards.

    November 30, 2022 WebPage Regulatory News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8597