The Key Attributes of Effective Resolution Regimes for Financial Institutions (the Key Attributes) were published by the Financial Stability Board (FSB) in November 2011. They are the international standard for resolution regimes for financial institutions and are an important component of the policy framework to address the moral hazard and systemic risks associated with institutions that are too big to fail.
In September 2013 the FSB published a report, Progress and Next Steps Towards “Ending Too Big To Fail”, which set out further action that was required from the G20, the FSB and other international bodies to complete the policy initiative to end too big to fail. It set identified uncertainties about the cross-border effectiveness of resolution measures as an important impediment to cross-border resolution and set the FSB’s commitment to “develop policy proposals on how legal certainty in cross-border resolution can be further enhanced” by the time of the G20 summit in Brisbane.
The FSB has now published a consultative document on cross-border recognition of resolution action. The consultative document sets out a package of considerations and policy measures to address the legal uncertainties about the cross-border effectiveness of resolution measures consisting of:
- elements that jurisdictions should consider including in their statutory cross-border recognition frameworks to facilitate effective cross-border resolution as required by the Key Attributes; and
- contractual approaches to cross-border recognition that the FSB agreed to support pending the adoption of comprehensive statutory frameworks. The contractual approach is focused on making temporary stays of early termination rights in financial contracts and write-downs or conversion of debt instruments in resolution effective in a cross-border context.
The deadline for responding to the consultation document is 1 December 2014.