On 12 June 2018, the Financial Stability Board (FSB) published a speech by its Secretary General, Dietrich Domanski, entitled Towards effective global resolution regimes: the road ahead.
In his speech Mr Domanski focuses on the FSB’s work on resolution stating that significant implementation work remains, both in the EU and beyond, to operationalise resolution plans and make firms resolvable, particularly on a cross-border basis.
Mr Domanski discusses:
- implementing the Total Loss-Absorbing Capacity (TLAC) standard. He reports that there has been good progress on the implementation of external TLAC. Global systemically important banks (G-SIBs) have issued substantial amounts of TLAC over the last few years and are generally on track to meeting both the 2019 and 2022 external TLAC requirements. However, there has been less progress as regards internal TLAC. Further efforts are needed to implement the internal mechanisms that are key for maintaining incentives for effective cross-border cooperation and implementing single point of entry resolution strategies. This includes designating material sub-groups, setting internal TLAC requirements, and structuring internal TLAC instruments including the design of the triggering mechanism;
- bail-in execution. Last November the FSB issued for consultation a set of Principles on Bail in-Execution. Respondents have generally welcomed the guidance but some changes have been suggested to clarify the application of the guidance for different types of resolution strategies beyond bail-in and for different types of liabilities beyond TLAC and also to reinforce the expectation that the home authority takes overall responsibility for the valuation process. The FSB expects to publish the final version of the principles in the coming weeks; and
- funding in resolution. Last November the FSB consulted on guidance to support the development of plans for G-SIB funding in resolution. Mr Domanski states that respondents have welcomed the focus on firm capabilities and the operational aspects of a funding strategy. Some respondents have also suggested that the guidance should consider ex ante disclosure of certain elements of the resolution funding frameworks, as well as how the authorities would communicate at the point of entry into resolution on the firm’s access to liquidity and its capacity to meet its obligations. The FSB hopes to reflect these points in the final guidance which is also expected in the coming weeks.
In addition, Mr Domanski describes two further pieces on FSB work on resolution. First, it is comparing approaches in FSB jurisdictions to the public disclosure of information on resolution planning and resolvability. Second, the FSB is taking stock of the approaches taken across FSB jurisdictions to trading book wind-down. The FSB expects to report on its findings on both topics later this this year.