Review on November 30th 2017 FSB Principles on Bail-in Execution Consultation Paper
Background: FSB set out rules to require G-SIBs to have minimum capital in place in the event of resolution in 2011. However, the publishing of Key Attributes of Effective Resolution Regimes for Financial Institutions and the FSB’s standard on Total Loss-absorbing Capacity did not address the issue regarding operational readiness with regard to executing a bail-in transaction. This newly published consultation paper proposes a set of principles to assist regulators to develop bail-in resolution strategies and make resolution operational for G-SIBs. Introduction: G-SIB resolution strategies are generally based on two distinct approaches: i) Open bank bail-in: may require the write-down and/or conversion into equity of the instruments and liabilities subject to bail-in under a shorter time frame. Recapitalizing the failed legal entity may simplify the process of issuing securities and obtaining regulatory approvals, as existing documentation could be used as a basis to ...