The report sets out the further actions that are required from the G20, the FSB and other international bodies to complete the policy initiative to end "too-big-to-fail".
The report takes stock of the progress made in implementing the FSB's policy framework for reducing the moral hazard posed by SIFIs, which was endorsed by the G20 in November 2010. Good progress has been made in putting this international policy framework in place and there are signs that firms and markets are beginning to adjust to authorities’ determination to end “too-big-to-fail”. However, more needs to be done through legislation, regulation and international agreements to end the “too-big-to-fail” problem.
The report sets out the further actions that are required from the G20, the FSB and other international bodies to complete the policy initiative to end “too-big-to-fail”.
In particular, jurisdictions should:
Undertake the legislative reforms that are necessary to implement the “Key Attributes of Effective Resolution Regimes for Financial Institutions” by 2015 for all parts of the financial sector that could cause systemic problems, including systemically important insurers and financial market infrastructure, such as central counterparties;
Empower domestic authorities to share information and cooperate fully.
Take legislative action as necessary to make resolution effective in a cross-border context;
Address impediments to resolvability that arise from complexities in firms’ legal, financial and operational structures;
Consider complementary domestic structural measures that help promote financial stability and improve the resolvability of financial institutions without posing unnecessary constraints on the integration of the global financial system or creating invectives for regulatory arbitrage;
Implement policy measures for domestic systemically important banks; and
Ensure that supervisors have the capacity to resource themselves and the independence to meet their mandate.
The FSB and other international bodies will support these actions by developing policies, including in relation to:
Information sharing mechanisms within crisis management groups and core supervisory colleges for global systemically important financial institutions;
The nature, amount and location within a group structure of gone-concern loss absorbing capacity that may be required in resolution to avoid the need for a bail-out with public funds;
The regulation of global systemically important insurers; and
Contractual and statutory approaches to prevent large-scale early termination of financial contracts in resolution.
Mark Carney, FSB Chair, commented: “The initiative to end too-big-to-fail is ambitious, but essential for a more robust, competitive and fair financial system. While much has been accomplished over the past few years, more needs to be done. In particular, jurisdictions need to implement fully the internationally agreed policies through additional legislation and regulation; cross border co-operation agreements must be struck, and policies for gone-concern loss absorbing capacity should be developed.”
© Financial Stability Board
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