Solving the "too big to fail" problem requires effective and credible resolution regimes. The Key Attributes of Effective Resolution Regimes for Financial Institutions ("Key Attributes"), which were endorsed by the G20 in November 2011, set out the responsibilities, instruments and powers that resolution regimes should have for all parts of the financial sector that could cause systemic problems. As an international standard, G20 jurisdictions have publicly committed to implement them.
A set of criteria to assess jurisdictions' compliance with the Key Attributes
Compliance with the international standard will be monitored and assessed, supported by a set of assessment criteria. The Financial Stability Board (FSB) is therefore today launching a public consultation on an Assessment Methodology for the Key Attributes. The FSB developed the draft methodology with the involvement of the IMF and the World Bank and the standard-setting bodies. As well as facilitating objective and consistent assessments of jurisdictions' compliance with the new international standard, the methodology can also assist jurisdictions in their legislative reforms to implement the Key Attributes. The methodology consists of a set of assessment criteria for each Key Attribute and also includes examples and explanations to guide the interpretation of the Key Attributes.
Application across all jurisdictions and financial sectors
Jurisdictions need to have resolution regimes in place that are capable of managing the failure in all parts of the financial sector that could cause systemic problems. The methodology has been developed as a single comprehensive document with assessment criteria for all sectors, including financial market infrastructure, as well as sector-specific criteria. It also guides assessors to take into account the structure and complexity, and the overall level of development of a jurisdiction's financial system.
Paul Tucker, Deputy Governor of the Bank of England and Chair of the FSB Resolution Steering Group, said: "To cope with the failure in its jurisdiction of systemic financial institutions without reliance on taxpayer solvency support, every jurisdiction requires a resolution regime consistent with the Key Attributes. That entails having powers and arrangements for proper cross-border cooperation, including recognition of foreign resolution measures. IMF and World Bank's assessments of standards and codes can be effective in promoting reforms to strengthen financial systems. By promoting consistent implementation of the Key Attributes globally and providing for formal and rigorous assessment of national resolution regimes, the development of the assessment methodology is another important step towards curing the "too big to fail" problem".
Comments and responses
The FSB welcomes comments and responses to the questions raised in the consultative document by Thursday, 31 October 2013. Responses should be sent to firstname.lastname@example.org. Responses will be published on the FSB website unless respondents expressly request otherwise.