FSB Finds Large Gaps in Global-Resolution Regime
In this report, we build on our earlier analysis and go in depth on the Financial Stability Board’s G20 assessment of the global resolution regime. One of the most obvious and immediate lessons of the great financial crisis, voiced clearly at the 2009 G20 summit (see Client Report SUMMIT5) was the need to ensure orderly liquidation of large financial-services firms without the expectations or use of taxpayer support that led to pre-crisis moral hazards and post-crisis chaos. The FSB finds that much progress towards ending TBTF has been taken over the past ten years, but much also remains undone with regard not only to large-bank resolution, but also to that for other SIFIs. The FSB’s report is particularly urgent due to recent U.S. statements about abandoning OLA (see Client Report RESOLVE44) and those in the EU calling for a complete revamp of the resolution framework in the wake of several recent large-bank failures.