November 15, 2018

FSB launched a public consultation on financial resources to support central counterparty (CCP) resolution and on the treatment of CCP equity in resolution, in addition to publishing its resolution report for 2018. Comment period on the consultation ends on February 01, 2019.

2018 Resolution Report. The report updates on progress in implementing the framework and policy measures to enhance the resolvability of systemically important financial institutions and sets out the priorities for FSB’s resolution work going forward. The report finds that jurisdictions have undertaken substantial reforms to mitigate the "too-big-to-fail" problem. Implementation is most advanced in the banking sector, where most home and key host jurisdictions of global systemically important banks (G-SIBs) have introduced resolution regimes that are broadly aligned with the FSB’s Key attributes of effective resolution regimes for financial institutions and have launched their resolution planning for G-SIBs. However, for insurance companies and CCPs progress is less advanced. The report concludes that it is important to keep the pressure up, on firms to continue strengthening their resolvability and complete the build-out of the necessary capabilities, and on authorities and lawmakers to complete and fully implement the necessary reforms. Starting early next year, FSB plans to evaluate the effects of the too-big-to-fail reforms to determine whether they are achieving their objectives and whether they have had any material unintended consequences. The evaluation will be completed in 2020.

Discussion paper on financial resources to support CCP resolution and the treatment of CCP equity in resolution. Centrally clearing standardized over-the-counter (OTC) derivatives is a pillar of the G20 Leaders’ commitment to reform OTC derivatives markets in response to the global financial crisis. CCPs’ "criticality" to the overall safety and soundness of the financial system means that authorities must take steps to ensure that CCPs do not become a source of systemic risk and that any CCP can be successfully resolved without resorting to a government bailout. FSB has concluded that further guidance on the necessary financial resources should be developed in an evidence-based way, including by drawing on the practical experience gained from resolution planning by relevant authorities and Crisis Management Groups. To inform this process, the FSB discussion paper sets out considerations that may be relevant to evaluating whether existing financial resources and tools are adequate to implement resolution strategies for individual CCPs; the discussion paper also sets out considerations that could guide authorities in developing possible approaches to the treatment of CCP equity in resolution. The discussion paper will be delivered to the G20 Leaders’ Summit in Buenos Aires later this month.

 

Related Links

Comment Due Date: February 01, 2019

Keywords: International, Banking, Insurance, PMI, CCP, CCP Resolution, Bank Resolution, Too Big to Fail, G-SIB, FSB

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