The Financial Stability Board (FSB) issued for consultation two proposals for guidance on the implementation of its Key Attributes of Effective Resolution Regimes for global systemically important banks (G-SIBs), designed to address the “too-big-to-fail” institutions.
First is the consultation on Principles on Bail-in Execution referring 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 minimizes impacts on financial stability, ensures the continuity of critical functions, and avoids exposing taxpayers to loss.
The document proposes a set of principles covering:
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.
Second, the Consultation on Funding Strategy Elements of an Implementable Resolution Plan proposing 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: 1. funding strategy capability; 2. a resolution funding plan by the authorities; 3. the use of firm assets and private sources of funding; 4. access to temporary public sector backstop funding mechanisms; and 5. information sharing and coordination between authorities.
Comments are due to the FSB by February 2, 2018.