The Financial Stability Board (FSB) launched a public consultation FSB on guidance for recovery and resolution planning for systemically important financial institutions (SIFIs).
The FSB says that the guidance, which aims to assist national regulators in implementing the FSB’s recovery and resolution planning requirements, builds on the experience of regulators to date, and covers: recovery triggers and stress scenarios to be used by firms in their recovery planning; the development of resolution strategies and operational plans; and, the identification of critical functions and supporting services that would need to be maintained in a crisis for systemic stability.
Recovery and resolution plans are required for all global systemically important financial institutions, and for any other firm that national authorities believe could have an impact on financial stability in the event of its failure.
“Identifying which strategy is best suited to a firm is critical and will need to be discussed by top officials in home and host countries,” says Paul Tucker, deputy governor of the Bank of England and chair of the FSB Resolution Steering Group. “Of course what turns out to be the best approach will in the end depend on the circumstances. Resolution strategies will need to be tailored to a group’s structure. Some groups will need to adapt their organisational or financial structure to remove impediments to resolution.”
Christine Cumming, first vice president of the Federal Reserve Bank of New York and chair of the FSB Cross-border Crisis Management Group added, “Alongside strengthened resolution regimes, recovery and resolution planning is a crucial element of the overall policy framework for addressing too-big-to-fail. There has been significant progress in many jurisdictions, but we need to keep in mind that these planning processes are iterative in nature. They will require refinement and adjustment over time as more experience is gained and more issues are identified for deeper examination.”
The FSB is seeking comments on the guidance by Dec. 7.
Separately, the FSB also published a statement updating information on the adherence of various jurisdictions to regulatory and supervisory standards on international cooperation and information exchange. It says that, of the 61 jurisdictions evaluated by the FSB, 44 have demonstrated sufficiently strong adherence to the standards (including Canada), and another 15 are taking the actions recommended by the FSB but have yet to demonstrate sufficiently strong adherence. The rest elected not to engage in dialogue with the FSB.