Silicon Valley Bank headquarters and branch stock photo
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The failures of Credit Suisse and several U.S. banks earlier this year has global policymakers reviewing measures designed to prevent taxpayer bailouts adopted in the wake of the global financial crisis, and contemplating whether more banks need requirements to guard against bailouts.

The Financial Stability Board (FSB) published the results of a review of the banking sector turmoil that arose in the spring, culminating in Credit Suisse’s takeover by Swiss rival UBS AG and the failure of several regional U.S. banks.

The review found that the Credit Suisse episode validated the “appropriateness and feasibility” of the framework for resolving global systemically important banks (G-SIBs) that run into financial trouble without resorting to a government bailout.

Requirements for the world’s biggest banks to adopt “living wills” and other provisions were developed in the wake of the global financial crisis, which triggered a series of public bailouts of failing financial institutions.

The framework “provided the Swiss authorities with an executable alternative to the solution that they deemed preferable in the case of Credit Suisse,” the review said.

The report also set out “important lessons” for policymakers in deploying the G-SIB resolution framework, “including the need for an effective temporary public sector liquidity backstop and operational readiness of banks to access it as a last resort.”

Additionally, the failure of Silicon Valley Bank, Signature Bank and First Republic Bank in the U.S. showed that the collapse of banks that aren’t considered G-SIBs “can still be systemically significant or critical upon failure,” the report found.

While the three bank failures were effectively resolved without bailing out shareholders and unsecured creditors, they raised the question of whether resolution planning requirements and loss-absorbing capacity requirements needs to be expanded, the FSB said.

It also highlighted the potential for faster bank runs due to the availability of mobile banking, the use of social media, and round-the-clock payments access, the report said.

In response, the FSB said it will conduct further work on the implementation of the resolution framework for G-SIBs and other systemically important banks. This includes effective designs for public-sector funding backstops, studying the choice of resolution strategies and regulators’ approach to crisis communications and coordination, given the potential for speedier bank runs.

It will also look at assessing systemic significance for non-GSIBs, resolution planning, loss-absorbing capacity, and the interaction between resolution frameworks and deposit insurance for these sorts of banks.