The Financial Stability Board (FSB) issued for consultation two proposals for guidance on the implementation of particular aspects of its Key Attributes of Effective Resolution Regimes for global systemically important banks (G-SIBs), thereby supporting the application of the overall policy framework to end “too-big-to-fail”.
Consultation on Principles on Bail-in Execution
Bail-in within resolution is a core part of resolution strategies of global systemically important banks (G-SIBs). It refers to the write-down and/or conversion of liabilities into equity and helps implement a creditor-financed recapitalization as part of an orderly resolution that minimises impacts on financial stability, ensures the continuity of critical functions, and avoids exposing taxpayers to loss.
The consultative document proposes a set of principles to assist authorities as they make G-SIB bail-in resolution strategies operational. The principles cover:
- disclosures on the instruments and liabilities within the scope of bail-in;
- valuations to inform and support the application of bail-in;
- processes to suspend or cancel the listing of securities, to notify creditors, and to deliver new securities or tradeable certificates following the entry into resolution;
- securities law and securities exchange requirements during the bail-in;
- processes for transferring governance and control rights and establishing a new board for the firm in resolution; and
- market and creditor communications.
Consultation on Funding Strategy Elements of an Implementable Resolution Plan
This consultative document sets out proposed guidance on the development of a plan for funding in resolution that builds on the FSB’s August 2016 Guiding Principles on the temporary funding needed to support the orderly resolution of a global systemically important bank (G-SIB) and existing supervisory and resolution guidance on liquidity risk management and resolution planning. It identifies a set of key funding strategy elements covering:
- a firm’s capabilities to support monitoring, reporting and estimating funding needs in resolution and to facilitate execution of the funding strategy;
- the development of a resolution funding plan by the authorities;
- the use of firm assets and private sources of funding;
- access to temporary public sector backstop funding mechanisms and ordinary central bank facilities; and
- information sharing and coordination between authorities.