The Financial Stability Board (FSB) issued guidance Tuesday that aims to help financial regulators and firms implement measures for recovery and resolution planning at systemically important banks.
The FSB published three sets of guidance, which it says, will assist authorities and firms in implementing the recovery and resolution planning requirements endorsed by the G20 in November 2011 to deal with the problems posed by banks that are “too big to fail”.
Preparations for such a failure is required for global and national systemically important financial institutions, it says; adding that effective recovery and resolution planning, and the development of credible resolution strategies for large, cross-border firms, “are essential for reducing the moral hazard” associated with these sorts of firms.
The guidance was issued for public consultation in November 2012, and the FSB says that it has been revised in light of the comments received during that consultation. It reports that respondents generally supported the overall direction of the draft guidance, but that they sought more clarity on the considerations and pre-conditions for the development and successful implementation of effective resolution strategies.
“Today’s publication marks a further important step towards making the largest, most complex financial firms resolvable without taxpayer solvency support,” said Paul Tucker, deputy governor of the Bank of England and chair of the FSB resolution steering group.
“Key jurisdictions are well on the way to having the necessary legislative regimes in place,” he noted. “Resolution strategies are being framed in line with the FSB’s Guidance Papers. Next steps will need to include regulatory measures to remove impediments, and changes to firms’ financial or organisational structure where necessary.”