On 13 December 2021, the Financial Stability Board (FSB) published a paper on the execution of bail-in.
Bail-in is at the core of resolution strategies for global systemically important banks (G-SIBs). Set out in the Key Attributes of Effective Resolution Regimes for Financial Institutions, it is an important tool enabling an orderly resolution that minimises any impact on financial stability and ensures the continuity of critical functions, without exposing taxpayers to loss.
The paper describes some of the main operational processes and arrangements that resolution authorities of G-SIBs follow when operationalising bail-in in accordance with their jurisdictions’ legal frameworks, securities law and requirements of trading venues (TVs). The paper:
- Provides an overview of bail-in resolution approaches, including the suspension of trading and delisting from TVs of securities of bailed-in firms; the (re-)listing and (re)admission to trading of new and existing securities as part of the bail-in process.
- Reviews the role of central securities depositories, which play an important role in the execution of bail-in, reflecting bail-in transactions in their books, e.g. the cancellation of shares, write-down and/or conversion of eligible instruments and issuance of new shares and interim instruments.
- Highlights cross-border challenges to the execution of bail-in, when securities are listed on more than one TV (dual listing or secondary listing) across different jurisdictions, or where securities are issued in a market other than the domestic market