Guiding Principles Resolutions for G-SIBS

In its report to the G20, “Progress in reform of resolution regimes and resolution planning for global systemically important financial institutions (G-SIFIs)” of 12 November 2014 the Financial Stability Board (FSB) identified the provision of temporary funding in resolution as an outstanding issue that needs to be addressed to complete the FSB’s systemically important financial institution (SIFI) reform agenda. Further work has found that funding poses a material impediment to the resolution of global systemically important banks (G-SIBs). In particular, there is a risk of insufficient liquidity to maintain critical operations arising from the G-SIB’s inability to roll over short-term borrowing or loss of access to alternative sources of credit. To address these impediments to resolution, the FSB Plenary agreed that further work should be conducted to develop a set of guiding principles regarding the temporary funding of firms in resolution to support implementation and resolution strategies of G-SIBs, which are herein presented and that establish that jurisdictions should have in place privately-financed deposit insurance, resolution-specific funds, or a funding mechanism with ex post recovery from the industry of the costs of providing temporary financing to facilitate the resolution of the firm.