The Financial Stability Board (FSB) has published two consultation papers relating to resolution – on internal total loss absorbing capacity (TLAC) and on firms’ access in resolution to financial market infrastructure (FMI).
The paper on TLAC proposes a set of guiding principles to support the implementation of the Internal TLAC requirement for a G-SIB, under which some loss-absorbing resources should be committed in advance to subsidiaries or sub-groups located in host jurisdictions and deemed material for the resolution of the G-SIB as a whole. This covers:
In Europe, much of this has already been included in the proposed CRR 2 and BRRD 2 revisions, and there is a much stronger legislative basis for home and host authority cooperation - in general, the home authority prevails, with the additional possibility of the EBA providing binding mediation.
The FSB consultation paper on continued access to FMI sets out arrangements to support the continuity of access to FMIs for a firm in resolution.
These arrangements apply to the providers of FMI services, FMI participants and the relevant FMI resolution and supervisory authorities.
Users of FMI services need to focus on recovery and resolution plans on their ability to continue to be able to use FMI services, including for example having the liquidity available and meeting all other conditions to preserve access to FMIs.
Meanwhile, FMIs should ensure that users that are put into resolution are not automatically excluded from being able to access FMIs, while supervisors and resolution authorities should ensure that FMIs themselves are subject to adequate recovery and resolution planning.