Transcript FSB SIFI project

Financial Stability and Cross-border
Crisis Cooperation
Work of the FSB
Eva Hüpkes
Financial Stability Board
Conference on Strengthening Financial Stability – Deposit Insurance
Contributions
Rome, 1 October 2010
Overview
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The FSB’s “SIFI project”
Achievements to date
Remaining challenges
Way forward
The issue
• Large scale support to institutions “too big to
fail” has increased
– moral hazard when counterparties believe
that they will never suffer a loss
– potential fiscal costs of a rescue and the
accompanying public outrage
– the risks that the home country will not have
the resources to rescue a bank (“too big to
save”)
• Pittsburgh: FSB to propose possible measures
to address the “too-big-to-fail” problem at
November Summit
FSB- Interim Report to G-20 of June 2010
“Any effective approach to addressing the “too
big to fail” problem needs to have effective
resolution at its base. An effective resolution
regime must provide the authorities with tools to
act safely and quickly to resolve a firm in a
manner that ensures the continued performance
of essential financial functions and uninterrupted
access of insured depositors to their funds,
without causing a panic or destabilising the
financial system, and without exposing the
taxpayer to the risk of loss. Cost incurred must
be recouped from the financial industry.“
We have come far…
• Recent or immanent reforms of national
resolution regimes:
– Canada (2009)
– Germany (2010)
– Switzerland (2004/2010)
– UK (2009)
– US (2010)
– European Union (2010)
– ...
…reforms are underway
• …to ensure continuity of functions in resolution,
e.g., access of depositors to their funds, through
– temporary “ bridge banks”
– transfers of assets and liabilities, including
deposit books uno actu to a bridge bank or
third party
– deposit insurance reforms
• CBRG Recommendation 1
• BCBS/IADI Core Principle 16 on effective
deposit insurance systems
…but challenges remain.
• How to make the resolution possible
without taxpayers’ support?
• How to ensure continuity of critical
functions and access of depositors to their
insured funds?
• How to use the resolution tools in a crossborder context?
To overcome the challenges…
• …the FSB will call for needed legal reforms to
ensure that
– National authorities have the capacity and
mandate to cooperate (“no automaticity of
actions”) and to share information across
borders
– National authorities set out the terms and
modalities of coordination and information
sharing in cooperation arrangements
– Recovery and resolution planning (“living
wills”) becomes a regular component of
regulatory oversight
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…implementation is key to success
• Monitoring of progress through
– Country reviews
– Thematic peer reviews
• Planned FSB thematic reviews on
– Deposit insurance
– Resolution regimes