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First FSB thematic peer review report on resolution regimes


On 11 April 2013, the Financial Stability Board (FSB) published its first “Thematic Review on Resolution Regimes” (the “Review”).

The objective of the Review is to evaluate FSB jurisdictions’ existing resolution regimes and any planned changes to those regimes using the FSB’s “Key Attributes of Effective Resolution Regimes for Financial Institutions” (“KAs”) as a benchmark.  The Review compares national resolution regimes across individual KAs and across different financial sectors.  It uses responses to an FSB questionnaire as the primary source of information.

The Review concludes that, while major legislative RRP-related reforms have already been undertaken by some jurisdictions, implementation of the KAs is still at an early stage and additional guidance from the FSB is necessary in order to assist implementation efforts.  More specific conclusions, loosely grouped by topic, are provided below.

Recovery and resolution planning

The Review reported that, in most jurisdictions, there is no explicit requirement in statute or regulation for the submission of recovery and resolution plans (“RRPs”) by domestic systemically important financial institutions.  In addition, most authorities have the power to ask, but lack the power to require, firms to make changes to their organisational and financial structures solely in order to improve their resolvability and in advance of resolution.

Resolution Powers

The Review concluded that all jurisdictions have enacted some of the resolution powers specified in the KAs in relation to banks and insurers, but few are equipped with a full set of powers.  Moreover, resolution powers are considerably more developed for banks than for insurance and, especially, for securities or investment firms and financial market infrastructures (“FMIs”), where both mandates and powers “fall well short of the standards in the KAs”.  Furthermore, not all powers are exercisable solely by resolution authorities and the approval of resolution actions by courts is still often required.

Very few authorities have the statutory power to full effect bail-in within resolution with respect to banks, and powers to do so in relation to insurers, securities or investment firms and FMIs are generally not available.  Most jurisdictions also lack the power to impose a temporary stay on the exercise of contractual early termination rights or to take control of the parent or affiliates of a failed financial institution, particularly if its holding company or significant operational affiliates are unregulated.  On the plus side, within most jurisdictions, the exercise of resolution powers is accompanied by safeguards, such as respect for the creditor hierarchy and rights of judicial review.

Resolution Funding

The Review found that most jurisdictions rely on privately funded resolution funds.  In general, resolution funding arrangements are available for banks, but less so for insurance and securities firms, and are largely non-existent for FMIs.  Notwithstanding the existence of private sources of funding, public financial support remains an important component of resolution funding.  Mechanisms for recovery of public funds from shareholders, participants or creditors of the failed firm, or the wider financial industry, are less well developed.

Cross-Border Cooperation

The Review noted that national legal frameworks for cross-border cooperation in resolution are, overall, less well-developed across all sectors than other areas of the KAs.  In particular, the cross-border sharing of information is limited due to the fact that FSB jurisdictions lack clear and dedicated statutory provisions for domestic authorities to share confidential information with foreign resolution authorities.  On the plus side, the Review found that, in general, creditors are not discriminated against by virtue of the location of their claim.

FSB Recommendations

The FSB makes a number of recommendations, grouped into the following actions areas:

  • full implementation of the KAs;
  • additional clarification and guidance on the application of the KAs by the FSB; and
  • on-going implementation monitoring.


The Review doesn’t really tell us much that we didn’t already know.  However, it presents an interesting snap-shot of the current global state of RRP and provides a large amount of information in a very digestible form.  Section II of the Review provides a good summary of the development of RRP through the course of the financial crisis, and of particular use are the summaries of:

  • the selected powers for resolving banks across FSB jurisdictions (Table 2);
  • the recent major RRP legislative reforms in FSB jurisdictions (Annex A); and
  • the selected features of resolution regime in FSB jurisdictions (Annex B).
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