On 14 November 2019, the Financial Stability Board (FSB) published its eighth report on the implementation of its resolution reforms.
The report assesses FSB members’ progress in implementing the FSB’s resolution policies for central counterparties (CCPs), banks and insurers. While acknowledging the “remarkable progress” already made, it points out that such progress has been uneven across reform areas and sectors and encourages authorities and firms to be mindful of any remaining gaps.
Key findings for CCPs and banks include:
- CCPs: One of the FSB’s policy priorities has shifted to further strengthening the resilience and resolvability of CCPs. The FSB’s policy work focuses on ensuring the adequacy of financial resources to support the orderly resolution of a CCP in a way that maintains financial stability and the continuity of critical CCP functions without taxpayers having to provide solvency support. The development of further guidance will result from this work, on which the FSB will consult in the first half of 2020. The guidance is intended to help authorities and crisis management groups in adopting a structured process for evaluating the adequacy of a CCP’s resolution resources and, if necessary, the need for additional resources. The guidance will also cover the treatment of CCP equity and non-default loss resolution scenarios; and
- Banks: Global systemically important banks have become more resolvable through total loss-absorbing capacity (TLAC) and other measures. However, certain challenges remain to determine the appropriate group-internal distribution of TLAC and management of non-pre-positioned resources.