The Financial Stability Board (FSB) has published its 2020 Resolution Report which highlights the need for resolution preparedness. It also looks at lessons learnt from the Covid-19 pandemic, which stressed the importance of ongoing work on resolvability, including for central counterparties (CCPs). Key findings of the report include:
- Banks – global systemically important banks (G-SIBs) are estimated to already meet the final 2022 minimum external total loss absorbing capacity (TLAC) requirement. TLAC-eligible bond issuance has continued through the difficult pandemic environment, with the market absorbing issuance without difficulty. Disclosure of external TLAC levels by G-SIBs has improved over the past year, however there is still little information available to market participants on the distribution of TLAC within banking groups;
- CCPs – recent market turmoil has demonstrated the benefits that central clearing brings for global financial stability. The Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO) coordinated a review, which qualified thirteen CCPs as systemically important in more than one jurisdiction. Most authorities have established crisis management groups for these CCPs and have commenced resolution planning; and
- Insurance – the FSB continues to monitor implementation of the Key Attributes for the insurance sector. Progress on implementation of national insurance resolution regimes has slowed down but a number of jurisdictions have identified systemically important insurers for purposes of recovery and resolution planning. Key areas of attention for FSB work on resolution planning for insurers are intra-group interconnectedness and funding in resolution.