Michael LewisA BoE blog has considered the practicalities of cross-border resolutions, taking the Credit Suisse and Silicon Valley examples. It notes that with the improved co-operation these issues were dealt with in an orderly fashion, unlike the 2008 problems, when international regulators started to co-operate only when the crisis had started.
Since 2008, international standards and regulatory relationships have both evolved, and this allowed for discussion and action between the relevant host authorities at an early stage. The blog discusses what happened over what it calls the “resolution weekend” for SVB, and how the swift action meant SVB UK’s clients could continue to use their banking services on Monday morning. Had the rescue not been possible, only a very small amount of customers would have received any compensation from the FSCS and even if the insolvency had turned out to be small, the delay in payment could have been enough for many customer businesses to fail.
For global systemically important institutions, like Credit Suisse, the “Crisis Management Group” has been set up – and the UK is the host for 3 UK G-SIB groups, and participates in another 18 as a host authority. Some G-SIBs provide important and significant services even in host countries, and so a global agreement for orderly resolution is critical. In the wake of the Lehman Brothers failure, the UK now has recognition powers consistent with the FSB Key Attributes that allow is to give legal force to resolutions from overseas authorities that affect a UK branch of the relevant business., and the Banking Act 2009 provides the UK’s framework for cross-border resolution.
The blog also gives the example of the PrivatBank bail in, which was the first use of the UK recognition powers in 2021.
Finally, the blog gives information on how the BoE decides whether to recognise a foreign resolution action and what information it needs to make its decision.