SARB published a discussion paper that sets out its intended approach to planning for, and conducting, an open-bank resolution. The discussion paper provides an overview of how the SARB intends to perform its functions as the resolution authority and sets out certain requirements that may be imposed on designated institutions after the promulgation of the Financial Sector Laws Amendment Bill, 2018 (FSLAB). SARB and designated institutions will have to develop clearly defined strategies and take preemptive measures to make the legal provisions in the FSLAB effective and to make the orderly resolution of large and complex financial institutions feasible. The closing date for comments is August 31, 2019 and the comments received will inform the process to develop the resolution planning standard, which is to be issued once the FSLAB is promulgated.
The paper first provides an overview of the elements of the resolution framework that will be introduced by the FSLAB, and how the powers assigned to the SARB may be applied in practice. The paper then sets out the key elements of planning for an open-bank resolution strategy, which will most likely be followed in the unlikely event of the failure of a bank that has been designated as a systemically important financial institution in terms of the Financial Sector Regulation Act, 9 of 2017 (FSRA). This also includes an overview of the requirements that designated institutions may have to meet. Finally, the paper describes the process that will most likely be followed leading up to, and during, a resolution.
The FSLAB contains proposed amendments to the FSRA, including the addition of a chapter with provisions for the orderly resolution of designated institutions, which will include all banks as well as non-bank systemically important financial institutions and their holding companies. The FSLAB also contains a chapter that will introduce an explicit deposit insurance scheme to provide protection to covered depositors in the event of a bank failure. The FSLAB amends a number of other acts that are required to make the resolution framework effective. The views expressed in the paper are based on the assumption that the FSLAB will be passed by Parliament in its current form. To the extent that amendments are made to the FSLAB, SARB will, where necessary, update the approach set out in the paper. This discussion paper should be seen as a first iteration, likely to be revised and expanded in future as experience is gained by both the SARB and the designated institutions and as the focus expands to all designated institutions. The intention is also to publish more detailed guidance on certain aspects of resolution planning in future, as the work progresses.
Related Link: Discussion Paper
Comment Due Date: August 31, 2019
Keywords: Middle East and Africa, South Africa, Banking, Resolution Planning, Resolution Framework, Open-Bank Resolution, SIFI, Too Big to Fail, Systemic Risk, SARB
Previous ArticleBOT Publishes Reporting Documents for TFRS 9 and Financial Data Set
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.