Recognizing that its key attributes for effective resolution remain unfulfilled, the Financial Stability Board is focusing in this consultation on one particularly vexing problem: how to ensure cross-border recognition of resolution actions taken in different regimes under varying laws where coordination between home- and host-country regulators is critical to a smooth resolution that avoids emergency ring-fencing or other self-protective action. The problems have been most evident as the U.S. and European Union seek to finalize their own resolution regime for the largest banks, but it has overall bearing on global efforts to end TBTF not only for banks, but also all global SIFIs. The FSB thus does not confine itself only to banks in this consultation, raising the prospect that non-banks that are so far unwilling to join agreements on termination rights could be forced to do so. Pending requirements demanding sufficient levels of total loss-absorbing capacity (TLAC) would also need to apply to non-banks for the FSB’s approach in this consultation to work as desired. Given the difficulties so far mandating resolution stays for G-SIBs, let alone other cross-border banks, and the incomplete nature of LAC standards, the FSB’s approach may prove difficult to achieve absent strong, near-term leadership by heads of state and, then, implementation by law-makers.
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