G-SIBs

FSB Publishes Report on Third Thematic Review of Resolution Regimes

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As part of a review launched in June 2018, the Financial Stability Board (FSB) published a report (which can be found here) on its third thematic peer review of resolution regimes. The findings of the first and second peer reviews of resolution regimes were published in April 2013 and March 2016 respectively. The reviews are designed to support the timely and consistent implementation by FSB jurisdictions of the FSB’s key attributes of effective resolution regimes for financial institutions.

Bank resolution planning frameworks have been adopted in most FSB jurisdictions, with planning most advanced for global systemically important banks in jurisdictions that are home to them. The report recommends further work to be done to ensure that bank resolution plans can be put fully into effect:

  • FSB jurisdictions – take further steps to adopt and operationalize their resolution planning framework, including: adopt resolution planning frameworks, adopt resolvability assessment frameworks and provide powers to require banks to take measures to improve resolvability and participate in cross-border coordinating arrangements. By June 2020, jurisdictions identified as not having a resolution planning framework will need to report to the FSB.
  • FSB – undertake work to support member authorities’ resolution planning for banks other than G-SIBs that could be systemic in failure.
  • FSB – work with relevant authorities and other bodies, to promote the sharing of bank resolution planning experiences and practices in enhancing cooperation and information-sharing arrangements.

EBA Publishes Final Draft Technical Standards and Guidelines on Methodology and Disclosure for G-SIIs

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The European Banking Authority (EBA) has published final draft technical standards and revised guidelines on the further specification of the indicators of global systemic importance and their disclosure. The guidelines have been developed according to Directive 2013/36/EU (the Capital Requirements Directive, CRD IV) and in line with international standards. CRD IV requires G-SIIs to hold higher capital levels in order to contain the risks they pose to the financial system and the impact that their potential failure may have on sovereign finance and taxpayers (so-called “too big to fall”). The draft revised Guidelines stipulate that not only G-SIIs, but also other large institutions with an overall exposure of more than €200 billion and which are potentially systemically relevant, will be subject to the same disclosure requirement as the G-SIIs.

The revision was prompted by a new data template and some minor changes introduced by the Basel Committee on Banking Supervision (BCBS) in January 2015 for the identification of global systemically important banks (G-SIBs). The list of EU G-SIBs identified by the BCBS and the global systematically important institutions (G-SIIs) identified by Member States’ authorities are identical.

The final draft technical standards and revised draft guidelines are set out in three reports (revised technical standards (RTS) report, implementing technical standards (ITS) report, and draft guidelines report). The final RTS and ITS will be presented to the European Commission for endorsement, following which the RTS will be subject to scrutiny by the European Parliament and the Council of the EU before publication in the Official Journal of the EU.

FSB Consults on Total Loss-Absorbing Capacity for G-SIBs

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On November 10, the Financial Stability Board (FSB) published a consultation paper on proposals on the adequacy of total loss-absorbing capacity (TLAC) of global systemically important banks (G-SIBs) in resolution.

In the consultation, the FSB seeks views on principles on loss absorbing capacity of G-SIBs in resolution, covering issues such as the calibration of the amount of TLAC required, the determination of TLAC-eligible instruments and the consequences of breaches of the requirement.  The deadline for responses to the consultation is February 2, 2015.

Basel Committee Final Rules on G-SIBs

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On November 4, the Basel Committee on Banking Supervision issued rules for global systemically important banks (G-SIBs), outlining: (i) the committee’s framework to identify G-SIBs; (ii) the magnitude of additional loss absorbency G-SIBs should have; and (iii) procedures for phasing in the new requirement. Basel Committee Release. Final Rule.