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12 November 2015

FSB welcomes extension of industry initiative to promote orderly cross-border resolution of G-SIBs

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Under the protocol, counterparties agree to the cross-border enforceability of existing statutory stays on resolution-related early termination and other default rights in OTC bilateral derivatives contracts and securities financing agreements.

A number of FSB member jurisdictions are in the process of finalising regulations and supervisory measures that will require non-bank counterparties of G-SIBs to trade on similar terms, thereby limiting the potential for arbitrage within the market and ensuring greater stability at the point of resolution. In anticipation of such regulations, the industry is developing a mechanism for non-bank counterparties to adhere to similar terms which is expected to be launched in 2016.

Mark Carney, Chair of the FSB, stated that “Since the financial crisis, regulators around the world have improved the resilience of firms but we must ensure that if a firm fails in the future it happens in an orderly way without taxpayers footing the bill and without major disruption to the wider financial system. The financial crisis exposed critical obstacles to cross-border resolution that complicated authorities’ ability to stem contagion across the global financial system. The Protocol closes off much of the cross-border close-out risk that statutory stays have not been able to eliminate because their reach is limited to national borders. I am particularly pleased to see that all sectors of the industry are working together to find a solution to this issue.”

As a result of the extension of the Protocol to securities financing transactions and its adoption by G-SIBs, it is estimated that more than $560bn of cross-border securities financing activity that could previously have been terminated at the point of resolution will be subject to the stay regimes of relevant G-SIB home jurisdictions.

Full press release

© FSB - Financial Stability Board

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