FSB peer review on resolution regimes

Objectives and scope• Objective of <strong>peer</strong> <strong>review</strong> is to evaluate <strong>FSB</strong> jurisdictions’existing resolution regimes (and any planned changes)using the KAs as a benchmark• Review is broad rather than deep so as to provide a usefulbaseline for future ‘deep dives’– Focuses primarily on those KAs that cover core provisions ofnational resolution regimes (i.e. scope, authority, powers, funding)– Covers different financial sectors, although most of the <strong>review</strong> isdedicated to the banking sector– Does not examine the implementation of KAs for individual G-SIFIsand does not include KAs only for G-SIFIs (e.g. CMGs, COAGs)• Primary source of information is questionnaire responses– Peer <strong>review</strong> team used draft assessment methodology for the KAs3

Main findings• While major reforms already undertaken by some <strong>FSB</strong>jurisdictions, implementation of the KAs is at an early stage– Not surprising as the KAs is new international standard andreforms needs to implement it involve major legislative changes– Reforms most advanced for banking sector, much less so forothers– Several <strong>FSB</strong> jurisdictions are strengthening their resolution regimes– Mechanisms for cross-border effectiveness of resolution measuresare largely absent• Resolution regimes exhibit broad range of practices interms of scope, mandates and powers of authorities– Different interpretations of ‘resolution regime’ complicated the work,e.g. administrative versus judicial powers4

Administrative authority forrestructuring/winding up firmsJurisdiction Banks InsurersSecurities / InvestmentFirmsFMIsLead authority forresolution of entities ofthe same groupArgentina BCRA SSN NAustralia APRA APRA N/ABrazil BCB SUSEP BCB NCanada CDIC OSFI (1) NChina PBC / CBRC CIRC CSRC YFrance ACP ACP ACP / AMFACP(only CCPs)YGermany BaFIN / FMSA BaFIN BaFIN YHong Kong HKMA IA NIndia RBI N/AIndonesiaIDICFSSF (2)NItaly BoI IVASS BoI / CONSOB BoI / CONSOB YJapan FSA FSA N/AKorea FSC / FSS / KDIC FSC / FSS / KDIC FSC / FSS / KDIC YMexico IPAB SHCP NNetherlandsDNBMoF (3)DNBMoF (3)MoF (only if financialundertakings) (3)MoF (only if financialundertakings) (3)YRussia BoR / DIA FFMS FFMS FFMS NSaudi Arabia SAMA SAMA CMA YSingapore MAS MAS N/ASouth Africa Registrar of Banks Registrar of Insurance Registrar of CIS NSpain BoS / FROB DGSFP CNMV (4)Switzerland FINMA FINMA FINMAFINMA(only if FMI has bankinglicense)Turkey BRSA / SDIF Treasury CMB NN/AUnited KingdomBoEHMT (6)PRA (BoE)BoE (5)HMT (6)BoE(only CCPs) (6)YUnited States FDIC (7)State regulatorsFDIC (2)SIPCFDIC (2)FDIC (2)N/A (systemic firms)6

Selected powers for resolvingbanks in <strong>FSB</strong> jurisdictionsJurisdictionAuthority overnon-regulatedFHCsAuthority overnon-regulatedgroup entitiesOverrideshareholderrightsTemporarilyoperate a firmTransfer / sellAssets andLiabilitiesBridgeAMCWrite down debtand convert toequity*Impose temporarystay ton earlyterminationrights in financialcontractsArgentina X XAustralia X X X X XBrazil X X X X X XCanada X X X X X XChina X X XFrance X XGermany X X X X XHong Kong X (1) XIndia X XIndonesia X X X xItaly X X X X X XJapan (3) X X X XKorea X X X X X XMexico X X X X XNetherlands X X X X XRussia X X X XS. Arabia X X X X X XSingapore X X X X XS. AfricaSpain X X X X X X (4) XSwitzerland X X X X X X X XTurkey X X X XUK X (2) X (2) X X X XUSA X X X X X X X X X7

Recommendation 1• <strong>FSB</strong> member jurisdictions should reform their resolutionregimes to fully implement the KAs:– Comprehensive resolution powers for banks– Resolution regimes for non-bank financial institutions– Extend scope of resolution regimes to holding cos. etc– Lead authority for resolving domestic entities of the same group– Mandates and capacity of resolution authorities to cooperate andcoordinate measures across borders– Information sharing (domestically and abroad) for resolution– Power for temporary stay on early termination of financial contracts– RRP requirements for all domestic SIFIs– Ability to require firms to take actions to improve their resolvability• Jurisdictions can and should implement most of theserecommendations without waiting for additional guidance9

Recommendation 2• The <strong>FSB</strong> should provide additional clarification andguidance on the application of the KAs to assist inimplementation, facilitate monitoring, and ensureconsistency in assessments of compliance with the KAs:– Resolution powers vs. ordinary corporate insolvency regime vs.powers for ordinary supervision purposes– Features and powers of resolution regimes for non-bank financialinstitutions to meet KA standards (together with standard-setters)– Powers for FHCs, significant non-regulated operational entities,branches of foreign financial firms– Mechanisms to give effect to foreign resolution measures– Resolution funding arrangements– Nature and scope of powers to require firms to improve resolvability– Suitable criteria for assessing operational capacity of authorities10

Recommendation 3• The <strong>FSB</strong> should undertake monitoring and reporting on theimplementation of the KAs:– Develop standardised monitoring template to facilitate analysis ofimplementation progress by jurisdiction, sector and KA– Conduct follow-up <strong>peer</strong> <strong>review</strong>s focused on resolution powers,cross-border cooperation and information sharing, and RRPs– Carry out, in coordination with relevant standard-setters, <strong>peer</strong><strong>review</strong>s on the application of the KAs to individual non-bankingsectors once relevant guidance by those bodies is issued11

Questions?• <strong>FSB</strong> weblinks– Websitewww.financialstabilityboard.org– Peer <strong>review</strong>shttp://www.financialstabilityboard.org/activities/<strong>peer</strong>_<strong>review</strong>s.htm– Resolution-related documentshttp://www.financialstabilityboard.org/list/fsb_publications/tid_146/index.htm• E-mail– costas.stephanou@bis.org