FSI Paper Examines Cross-Border Cooperation in Resolution Planning
The Financial Stability Institute (FSI) of BIS published a paper that examines the cross-border resolution cooperation and information-sharing arrangements for global systemically important banks (G-SIBs) and other foreign-owned locally systemic banks in 16 jurisdictions. Cross-border cooperative arrangements provide a means for discussing and agreeing resolution strategies and the planning and coordination of resolvability assessments. The study finds that there has been some progress in establishing a range of arrangements; however, in certain instances the information needs of host authorities on resolution planning continue to be unmet.
The paper is based on a survey of authorities from 16 jurisdictions that are home or host to global and domestic systemically important banks, including the non-crisis management group (CMG) host jurisdictions. The surveyed authorities are from locations worldwide, including EU, UK, US, Canada, Hong Kong, United Arab Emirates, Switzerland, South Africa, Malaysia, New Zealand, Philippines, Bermuda, and Bahamas. The paper provides an overview of the forms of cooperative arrangements described in the FSB Non-CMG Host Guidance and illustrative examples of how such arrangements may be adapted to different resolution strategies. It then summarizes recent developments relevant to cross-border cooperation in this area and provides a high-level overview of the FSI survey results. Next, the paper describes the firm-specific and non-firm-specific cooperative arrangements that the surveyed authorities have established or participated in, before concluding with certain suggestions based on the findings of the survey.
The authorities surveyed for this paper generally recognize that cooperation and information-sharing between home and host authorities would lead to better outcomes in cross-border resolution. However, despite the progress to date, the access of host authorities to information varies and gaps still exist. Whether or not host authorities can access adequate information about resolution strategies seems to influence how far they are likely to rely on, or cooperate with, the group resolution strategy. Nevertheless, the commitment of time and resources entailed by the establishment and maintenance of firm-specific cooperative arrangements should not be underestimated. Cross-border cooperation is not new for home and host authorities, but doing so in a resolution-specific context is new ground and requires new or modified arrangements. Establishment of the appropriate information-sharing frameworks takes time and effort on the part of home authorities, who may have to deal with multiple demands.
Non-CMG host authorities would benefit from taking the initiative to notify the home authority where a firm’s operations are locally systemic. They may also wish to consider the type and granularity of information needed to allow them to understand the resolution strategy and, where appropriate, support cross-border resolution. Home resolution authorities may also be more able under their own legal frameworks to share information with overseas authorities that have analogous mandates and functions. Finally, the paper highlights that many of the reported cooperation and information-sharing arrangements remain untested in a crisis. Therefore, simulation exercises may provide a useful means for building certainty and enhancing coordination between home and host authorities in relation to their actions in the event of a cross-border resolution. Continued progress with adopting resolution regimes based on the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions may, therefore, be a facilitating condition for cross-border cooperation. Since cooperative arrangements between the home and host authorities are still evolving, it would be helpful to revisit progress made in this area in due course.
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Keywords: International, Banking, G-SIBs, D-SIBs, Cross-Border Cooperation, Resolution Planning, Crisis Management Framework, Resolvability Assessment, BIS, FSI
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