Risk and Regulation

Background: August 18th 2016, FSB published the Guiding Principles on the temporary funding needed to support the orderly resolution of a global systemically important bank, to assist authorities in their resolution planning work. This report provides additional guidance for the development of an implementable resolution funding plan and identifies a set of key funding strategy elements. Summary: Key funding strategy elements proposed by FSB: Strategy for maintaining liquidity in resolution i) Assess whether the overall strategy for ensuring adequate liquidity in resolution is feasible and consistent with overall resolution strategy. Firm capabilities to support monitoring, reporting and estimating funding needs in resolution ii) Capabilities to measure sources and positioning of liquidity and any impediments or actions taken to improve the firm's capabilities. iii) Capabilities to report liquidity information on a timely basis. iv) Capabilities to identify and rapi...

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 ...