The Financial Stability Board today released a series of documents – two final, three proposed – designed to ensure that global systemically-important banks (G-SIBs), insurers (G-SIIs) and financial-market infrastructure (FMI) like CCPs can truly be resolved without financial-market instability.  FSB did not today release its TLAC standards; although the FRB proposed these on Friday (see Client Report TLAC2), the global ones will not come out until next week.  Much of the work today is designed to bridge gaps between widely differing resolution regimes – the U.S. remains determined to end TBTF and thus use no taxpayer funds for banks, but the EU, Japan, and other nations view their G-SIBs as “national champions” to be rescued first with private funds, and with public support thereafter if necessary.  Similarly, the U.S. insurance-resolution framework is not only state-run, but also focused on policy-holder protection, in contrast to the FSB’s approach to systemic resilience achieved at (if necessary) cost to policy-holders. This is an issue Karen Petrou laid out last week to state insurance resolution authorities.  The FSB framework and the new consultations generally push for statutory change to accomplish the FSB’s policy objectives, but it recognizes obstacles by also pushing for contractual accords akin to last year’s among several G-SIBs on automatic stays.

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