Risk management presentation June 17 2013

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International Association of Risk and Compliance
Professionals (IARCP)
1200 G Street NW Suite 800 Washington, DC 20005-6705 USA
Tel: 202-449-9750 www.risk-compliance-association.com
Top 10 risk and compliance management related news stories
and world events that (for better or for worse) shaped the
week's agenda, and what is next
Dear Member,
Did you know that ―Economicsis a highly
sophisticated field of thought that is superb at
explainingtopolicymakers preciselywhythe
choicesthey made in the past werewrong. About
thefuture, not somuch.‖
Whosaid that?
ChairmanBen S.Bernanke, at the BaccalaureateCeremony at Princeton
University.
Thetitleof his speech:The TenSuggestions
Mr. Bernanke, are you jealousof thisTop 10list?
Whydid you develop exactly 10suggestions?
His speech is very interesting. We can even find
more about meritocracy:
―Ameritocracyis a system in which thepeoplewhoare theluckiest in
their health and genetic endowment;luckiest in terms of family support,
encouragement, and, probably, income; luckiest in their educational and
career opportunities;and luckiest in somanyother waysdifficult to
enumerate--these are the folkswhoreap the largest rewards.
International Association of Risk and Compliance Professionals (IARCP)
www.risk-compliance-association.com

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Theonly wayfor even a putative meritocracyto hope to passethical
muster,tobeconsideredfair, isif thosewhoaretheluckiest in all of those
respectsalsohave thegreatest responsibilitytowork hard, to contributeto
thebetterment of theworld, and to share their luck withothers.‖
Well, I will spend the weekendthinkingabout it, especiallythe
methodology, howtheycan ―sharetheir luck withothers‖.
As a consultant, I must developa stepbystep luck-sharingmethodology.
Well, I think it is better tomake it ―principles-based‖ instead of
―rules-based‖.
I already have some ideas.Theprocesswill have 3Pillars.
Pillar 1:Luck Quantification.
Pillar 2: Internal Luck AdequacyAssessment Process, and luck
stress-testing.
Pillar 3: Luck Transparency.
It looksabit like Basel iii … I know...
Accordingtothe―if all youhaveisahammer, everything lookslike anail‖
principle, wecan use a Basel iii approach almost everywhere.
WewilluseaMonteCarlosimulationtoquantify the―luckiest in somany
other waysdifficult toenumerate‖ part, asMr. Bernanke said.
MonteCarlois a nicequantitativerisk analysistechnique.
We will simplygenerate 20,000,000luck scenarios, wewill find the range
of possibleoutcomesand their probabilities, then wewill find a
probabilityweightedluckaverage, and wewill calculate theLaR (Luck at
Risk).

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Yes,you canusethe Basel III model. Youwill simplyreplace the―risks‖
with ―opportunities‖.
Inbanking, wehavepositiveand negative(forourprofitability) inputs.In
our luck-sharingmethodology wehave only profitableinputs.
Instead of inflationweput inheritance– the passingon property, titles
etc. upon the death of relativeswehave never met. You get thepicture.
Insteadofmarket risk (andtheCredit ValuationAdjustment amendment)
weput opportunitytoinvest in Google-like firms whentheyare still
young.
Thebest part:TheProbability ofDefaultfor anycounterpartyiszero– we
are lucky, remember?
And, I have onlystarted thinkingabout it. 
Read moreat Number 1below.
Another very interestingstory, about banksand insurancefirms:
―Thechangesin banking regulation make more important the roleof
insurersasprovidersof long-term bank funding‖
This is the opinion or Gabriel Bernardino, Chairman of EIOPA (EIOPA
is the European Insurance and Occupational Pensions Authority, one of
threeEuropean SupervisoryAuthorities).
He alsodiscussesa reallyimportant problem for insurers:The low
interest rates, that …
―On the liabilitiesside, theylead toan increasein firms‘obligationsin
today‘s termsand, consequently, toa deteriorationof their financial
position.

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On the assetsside, low interestrateshave an adverse impact on
investment resultsand increasethe reinvestment risk of assets.‖
Themorel of thestory: Many insurershave a real problem withthelow
interest rates.
Read more at Number 3 below.
Welcometo the Top 10list.
BestRegards,
GeorgeLekatis
President of the IARCP
General Manager, ComplianceLLC
1200G Street NW Suite
800,Washington DC 20005,USA
Tel: (202) 449-9750
Email: lekatis@risk-compliance-association.com
Web: www.risk-compliance-association.comHQ:
1220N. Market Street Suite804, Wilmington DE
19801,USA
Tel: (302) 342-8828

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ChairmanBen S.Bernanke
At the BaccalaureateCeremony at Princeton
University, Princeton, New Jersey
The Ten Suggestions
―I wrote recentlytoinquire about the statusof my leavefrom the
university, and the letter I got back began, "Regrettably, Princeton
receives many morequalified applicantsfor facultypositionsthan wecan
accommodate."‖
Thematic Review on Resolution
Regimes
Peer Review Report
Financial Stability Board (FSB) member jurisdictionshave committed,
under the FSBCharter and in the FSBFramework for Strengthening
Adherence toInternational Standards, toundergoperiodic peer reviews.
Tofulfil this responsibility, theFSB hasestablisheda regular programme
of country and thematicpeer reviewsof itsmember jurisdictions.
Interview with Gabriel Bernardino, Chairman of
EIOPA
Conductedby Dr. Matthias Schoder, WirtschaftsForum
(Germany)

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Global liquidity: where do westand?
Speechby JaimeCaruana, General Managerof the
Bank for International Settlements,preparedfor the
Bank of Korea International Conference2013on
"Assessing global liquidityin a global
framework", Seoul.
Implicationsof the Single Supervisory
Mechanism on the European System of
Financial Supervision: the EBAperspective
Intervention of Andrea Enria, Chairman of the EBA
European Commission - Public hearing on financial
supervision in the EU - Brussels
Theconstruction of theSingleSupervisory Mechanism (SSM) and the
wholeproject of theBanking Union areusually justifiedon the basisof
theshortcomingsof the institutional framework for theSingleCurrency,
whichhavebeen soclearlyexposed during thesovereign debt crisis.
Internationalization of the RMB and the
role of Macao asa financial platform
Address by MrAnselmo Teng, Chairman of the
MonetaryAuthority of Macao, at the―2013
Internationalizationof RMB Global Forum‖,

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jointlyorganised by theShanghai Instituteof the International Financial
Centre of the Shanghai Universityof Financeand Economicsand the
Centre for International Financeand Regulation (Australia), Shanghai.
The Digitisation of our Economies
Neelie Kroes, Vice-President of the European
Commission responsiblefor the DigitalAgenda, 11th
European BusinessSummit, Brussels
―Our world isgoingonline‖.
Digital "to-do" list: new digital priorities for
2013-2014
TheEuropean Commission hasadopted seven new prioritiesfor the
digital economy and society.
Thedigital economyis growingat seventimesthe rateof the rest of the
economy, but this potential is currentlyheld back by a patchy
pan-Europeanpolicyframework.
Today's prioritiesfollowa comprehensivepolicy review and placenew
emphasisonthemosttransformativeelementsof theoriginal2010Digital
Agenda for Europe.

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Understanding Supervisory Colleges
Vice Chair Janet L. Yellen
At the InternationalMonetaryConference, Shanghai,
China
Regulatory Landscapes: AU.S. Perspective
―I'll summarizetheconsiderable progresssince2008
tomake the global financial system more resilient,
andthen offer my viewson what more should be
done‖.

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ChairmanBen S.Bernanke
At the Baccalaureate
Ceremonyat Princeton
University, Princeton, New
Jersey
The Ten Suggestions
It's nicetobe back at
Princeton.
I find it difficult to believethat it's been almost 11years sinceI departed
thesehallsfor Washington.
I wrote recentlytoinquireabout the statusof my leavefrom the
university, and the letter I got back began, "Regrettably, Princeton
receives many morequalified applicantsfor facultypositionsthan wecan
accommodate."
I'll extend my best wishestothe seniorslater, but first I want to
congratulate theparentsand familieshere.
As a parent myself, I know that puttingyour kid through college these
days isnowalk in thepark.
Someyears agoI had a colleaguewhosent three kidsthrough Princeton
even though neither he nor his wife attendedthis university.
He and his spousewereveryproud of that accomplishment, asthey
should havebeen.
But my colleague also used to say that, from a financial perspective, the
experience was like buying a new Cadillac every year and then driving it
off a cliff.

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I should saythat he alwaysadded that he woulddo it all over again in a
minute.
So, well done, moms, dads, and families.
This is indeed an impressiveand appropriate settingfor a
commencement.
I am sure that, from thislectern, any number of distinguished spiritual
leadershave ruminatedon thelessonsof the Ten Commandments.
I don't have that kind of confidence,and, anyway, coveting your
neighbor'sox or donkey is not theproblem it used to be, soI thought I
wouldusemy few minutestodaytomakeTenSuggestions,ormaybe just
Ten Observations,about the worldand your livesafter Princeton.
Pleasenote, thesepointshavenothingwhatsoever todowith interest
rates.
My qualificationfor making such suggestions, or observations,besides
havingkindlybeen invited to speak today by President Tilghman, is the
same asthe reasonthat your obnoxiousbrother or sister got togoto bed
later--I am older than you.
All of what followshasbeen road-testedin real-life situations,but past
performanceisnoguaranteeof future results.
1.Thepoet Robert Burnsonce said somethingabout thebest-laidplans
of miceand men gangingaft agley, whatever"agley" means.
A more contemporary philosopher, Forrest Gump, said something similar
about life and boxesof chocolatesand not knowing what you are going to
get.
Theywereboth right.

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Lifeis amazinglyunpredictable;any 22-year-old whothinksheor she
knowswheretheywill be in 10 years, much lessin 30, is simplylacking
imagination.
Look what happened to me:Adozen years agoI wasmindingmy own
businessteachingEconomics101inAlexander Hall andtrying tothink of
good excusesfor avoidingfacultymeetings.
Then I got a phonecall . . . In caseyou are skeptical of Forrest Gump's
insight, here's a concretesuggestion for each of thegraduating seniors.
Take a few minutesthe first chanceyou get and talk to an alum
participatingin his or her 25th, or 30th, or 40th reunion--you know,
somebodywhowasnear the front of theP-rade.
Ask them, back when theyweregraduating 25, 30, or 40years ago, where
theyexpected to be today.
If you can get them toopen up, theywill tell you that todaytheyare happy
and satisfied in variousmeasures, or not, and their personal stories will be
filledwithhighsand lowsand in-betweens.
But, I am willingtobet, thoselife storieswill in almost all casesbe quite
different, in largeand small ways, from what theyexpectedwhen they
startedout.
This is a good thing, not a bad thing; whowantstoknow the end of a
storythat's only in itsearlychapters?
Don't be afraid to let the drama playout.
2. Doesthe fact that our livesare soinfluencedby chanceand seemingly
small decisionsand actionsmean that there is no point toplanning, to
striving?
Not at all.

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Whatever life may havein storefor you, each of you hasa grand, lifelong
project, and that is the development of yourself asa human being.
Your familyand friendsandyour timeat Princetonhavegivenyou agood
start.
What will you dowithit?
Will you keep learningand thinkinghard and criticallyabout the most
important questions?
Will you become an emotionallystronger person, more generous, more
loving, more ethical?
Will you involve yourself actively and constructively in the world?
Many things will happen in your lives, pleasant and not so
pleasant, but, paraphrasing a Woodrow Wilson School adage from the
timeI washere, "Wherever you go, there you are."
If you are not happywith yourself, even the loftiestachievementswon't
bring you much satisfaction.
3. The concept of successleadsme to consider so-calledmeritocracies
andtheir implications.
We havebeen taught that meritocraticinstitutionsand societies are fair.
Puttingasidethe realitythat nosystem, includingour own, is really
entirelymeritocratic, meritocraciesmay be fairer and more efficient than
some alternatives.
But fair in an absolutesense?
Think about it.
Ameritocracyisasystem in whichthepeoplewhoaretheluckiestintheir
health and geneticendowment;luckiestin termsof family support,

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encouragement, and, probably, income; luckiest in their educational and
career opportunities;and luckiest in somanyother waysdifficult to
enumerate--theseare thefolkswhoreap the largest rewards.
Theonly wayfor even a putative meritocracy tohope to passethical
muster,tobeconsideredfair, isif thosewhoaretheluckiest in all of those
respectsalsohave thegreatest responsibilitytowork hard, to contributeto
thebetterment of theworld, and to share their luck withothers.
As the Gospel of Luke says(and I am sure my rabbi will forgive me for
quotingthe New Testament in a good cause):"From everyone to whom
much hasbeen given, much will be required;and from the one to whom
much hasbeen entrusted, even more will be demanded" (Luke
12:48,New Revised Standard Version Bible).
Kind of grading on thecurve, you might say.
4. Whois worthyof admiration?
Theadmonition from Luke--which is shared by most ethical and
philosophicaltraditions,bythe way--helpswiththis question aswell.
Thosemostworthyofadmirationarethosewhohavemadethebest useof
their advantagesor, alternatively, coped most courageouslywiththeir
adversities.
I think most of uswouldagreethat people whohave, say, littleformal
schoolingbut laborhonestly and diligentlyto help feed, clothe, and
educatetheir familiesare deserving of greater respect--andhelp, if
necessary--thanmany peoplewhoare superficiallymore successful.
They're more fun to have a beer with, too. That'sall that I know about
sociology.
5. Since I havecovered what I know about sociology, I might aswell say
somethingabout political scienceaswell.

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In regardtopolitics,I havealwayslikedLilyTomlin'sline,inparaphrase:
"I try tobe cynical, but I just can't keepup."
We all feel that waysometime.
Actually, havingbeen in Washingtonnow for almost 11years, asI
mentioned, I feel that wayquite a bit.
Ultimately, though, cynicism is a poor substitutefor critical thought and
constructiveaction.
Sure, interestsand money and ideologyall matter, asyou learned in
politicalscience.
But my experienceisthat most of our politiciansand policymakers are
tryingtodotheright thing, accordingtotheirownviewsandconsciences,
most of the time.
If you think that thebad or indifferent resultsthat toooften come out of
Washington areduetobasemotivesand bad intentions,you are giving
politiciansand policymakers waytoomuch credit for beingeffective.
Honesterrorinthefaceofcomplex andpossiblyintractableproblemsisa
far more important source of bad resultsthan are bad motives.
Forthesereasons,thegreatest forcesin Washingtonareideas,andpeople
preparedto act on thoseideas.
Publicservice isn't easy.
But, in theend, if you are inclined in that direction, it is a worthyand
challengingpursuit.
6. Having taken a stab at sociology and politicalscience, let me wrapup
economicswhile I'm at it.

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Economicsis a highlysophisticated field of thought that is superb at
explainingto policymakers preciselywhythechoicesthey madein the
past werewrong.
About the future, not somuch.
However,careful economicanalysisdoeshave one important benefit,
whichis that it can help kill ideasthat are completely logically
inconsistent or wildlyat variancewiththedata.
This insight coversat least90 percent of proposed economic policies.
7.I'm not going to tell you that money doesn't matter, becauseyou
wouldn't believeme anyway.
In fact, for toomany people around theworld, money isliterallya
life-or-deathproposition.
But if you are part of the lucky minoritywith the ability tochoose,
remember that moneyis a means, not an end.
Acareer decision basedonlyon money and not on love of theworkor a
desireto make a differenceis a recipe for unhappiness.
8.Nobody likes tofail but failure is an essential part of life and of
learning.
If your uniform isn't dirty, you haven't been in the game.
9.I spoke earlier about definitionsof personal successin an
unpredictableworld.
I hopethat asyou developyour owndefinitionof success,you willbeable
todo so, if you wish, witha closecompanion on your journey.
In making that choice, remember that physical beautyis evolution's way
of assuring usthat the other person doesn't have toomany intestinal
parasites.

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Don't get me wrong, I am all for beauty, romance, and sexual
attraction--wherewouldHollywood and MadisonAvenue be without
them?
But while important, thosearenot theonlythingstolookfor in a partner.
Thetwoof you will have a long trip together, I hope, and you will need
each other's support and sympathy more timesthan you can count.
Speakingassomebodywhohasbeenhappily marriedfor 35years, I can't
imagineany choicemore consequential for a lifelongjourneythan the
choiceof a traveling companion.
10.Call your mom and dad once in a while.
Atime will come whenyou will want your own grown-
up, busy, hyper-successful children tocall you.
Also, remember whopaid your tuition to Princeton.
Thosearemy suggestions.
They're probablyworth exactlywhat you paid for them.
But theycome from someonewhosharesyour affection for this great
institution and whowishesyou thebest for thefuture.

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Thematic Review on Resolution
Regimes
Peer Review Report
Foreword
Financial Stability Board (FSB) member jurisdictionshave committed,
under the FSBCharter and in the FSBFramework for Strengthening
Adherence toInternational Standards, toundergoperiodic peer reviews.
Tofulfil this responsibility, theFSB hasestablisheda regular programme
of country and thematicpeer reviewsof itsmember jurisdictions.
Thematic reviewsfocuson the implementation and effectivenessacross
theFSBmembership of international financial standardsdeveloped by
standard-settingbodiesand policiesagreedwithintheFSB inaparticular
area important for global financial stability.
Thematic reviewsmay alsoanalyseother areasimportant for global
financial stabilitywhereinternational standardsor policiesdo not yet
exist.
Theobjectivesof thereviewsare toencourageconsistent cross-country
and cross-sectorimplementation;to evaluate (wherepossible) the extent
towhichstandards and policieshavehad their intended results;and to
identify gapsand weaknessesin reviewedareasand tomake
recommendationsfor potential follow-up(includingvia the development
of new standards) by FSB members.
This report describesthe findingsof thefirst peer review on resolution
regimes,includingthekey elementsof the discussion in the FSB
Resolution SteeringGroup and theFSB StandingCommitteeon
StandardsImplementation.

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Thedraft report for discussion waspreparedby a team chairedby Martin
J.Gruenberg (US Federal Deposit InsuranceCorporation), comprising
Alessandra deAldisio (Bank of Italy), Bader T. Alsudairi (Saudi Arabian
MonetaryAgency), Felton C. Booker (US Federal Reserve Board),
ChristineHauner (BaFin Germany), KatharinaHartmann (German
Federal Ministryof Finance), Junichi Kashiyama (Japan Financial
ServicesAgency), Barry King (UK Financial ServicesAuthority), Vincent
Lee (Hong Kong MonetaryAuthority), Mike Mercer (Canada Deposit
InsuranceCorporation), Geof Mortlock(Australian Prudential Regulatory
Authority), Liu Qin (People‘sBank of China), Reto
Schiltknecht (FINMASwitzerland), Virginia Rutledge (International
MonetaryFund), and David Scott (World Bank). David Hoelscher,
CostasStephanou and Ruth Walters (FSB Secretariat) providedsupport
tothe team and contributedto thepreparation of the peer review report.
Definitions of key termsused in the report
―Bail-in within resolution‖ – restructuringmechanismsto recapitalisea
firm in resolution or effectivelycapitalisea bridge institution, under
specifiedconditions,through thewrite-down, conversion or exchangeof
debt instrumentsand othersenior orsubordinatedunsecuredliabilitiesof
thefirm in resolution into, or for, equityor other instrumentsin that
firm, theparent company of that firm or a newlyformed bridge
institution, asappropriateto legal frameworksand market capacity.
―Bail-out‖ – anytransferof fundsfrom public sourcestoa failed firm or a
commitment by a public authoritytoprovidefundswith a view to
sustainingafailedfirm (for example,bywayof guarantees)that resultsin
benefit tothe shareholdersor uninsured creditorsof that firm, or the
assumptionof risksbythepublic authoritythat wouldotherwisebeborne
bythe firm and itsshareholders,wherethe value of thefundstransferred
is not recoupedfrom the firm, itsshareholdersand unsecured creditors
or, if necessary, the financial system more widely, or wherethe public
authorityis not compensatedfor the risksassumed.
―Bank‖ – anyfirm that takesdepositsorrepayable fundsfrom the
public,and that isdefinedbythe relevant national legislationasa bank.

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―Bridgeinstitution‖ – anentity, authorisedorlicensedinaccordancewith
anyapplicablerequirementsunder national law,that is establishedto
temporarily take over and maintain certain assets,liabilitiesand
operationsof a failed firm aspart of theresolution process.
―Earlytermination rights‖ – contractual acceleration, termination or other
close-out rightsin financial contractsheld by counterparties of a firm that
maybetriggeredontheoccurrenceof anevent orcircumstancesset out in
thefinancial contract, such asan insolvencyevent or the entryinto
resolutionof thefirm.
―Entry intoresolution‖ – theformal determination by the relevant
authorityor authoritiesthat a firm meetsthe conditionsfor entry into
resolution and that it will be subject toresolution powers.
―Financial contract‖ – anysecuritiescontract, commoditiescontract,
forwardcontract, repurchaseagreement, optionscontract, swap
agreement and any similar agreement that, in every case,is explicitly
identifiedunder thelegal framework of the jurisdictionassubjectto
definedtreatment inresolutionand insolvency(forexample,inrelationto
earlytermination rightsor topreserve theeffect of nettingagreements)
that is distinct from other (non-financial) contracts.
―Financial conglomerate‖– anygroup of companiesunder common
control or dominant influence,includingany financial holdingcompany,
that conductsmaterial financial activitiesin at least twoof theregulated
banking, securitiesor insurancesectors.
―Financial firm‖ or ―financial institution‖ – anyentitytheprincipal
businessof whichis theprovision of financial servicesor theconduct of
financial activities,including, but not limitedto, deposit-taking, credit
intermediation, insurance, investment or securitiesbusinessor operating
financial market infrastructure.
―Financial group‖ – a group composed of entitieswhoseprimary
activitiesare financial in nature.

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―Financial market infrastructure(FMI)‖ – a multilateral system among
participatingfinancial institutions,includingtheoperator of the system,
used for the purposesof, clearing, settlingor recording payments,
securities,derivativesor other financial transactions.
It includespayment systems, central securitiesdepositories, securities
settlement systems, Central Counterparties(CCPs), and trade
repositories.
―Firm in resolution‖ – a firm in relation towhichresolution powersare
beingexercised.
Where resolution powershavebeen exercised in relation to a firm, that
firm isconsideredtobe―in resolution‖ foraslongasit remainssubject to
measurestaken or supervisedby a resolution authorityor toinsolvency
proceedingsinitiatedby the resolution authority.
―Group‖ – a parent company (whichmay be a holding company) and its
direct and indirect subsidiaries, both domestic and foreign.
―Holdingcompany‖ or―financialholdingcompany‖ (ofafinancialgroup
or conglomerate) – a companythat is formed tocontrol financial firms.
This concept coversintermediateor ultimatecontrol.
―Home jurisdiction‖ – the jurisdiction where the operationsof a financial
firm or, in the case of a G-SIFI, its global operations, are supervised on a
consolidatedbasis.
―Investment firm‖ or ―Securitiesfirm‖ – anynon-deposit-taking
institution that conductsinvestment or securitiesbusinesson a regular
basis,including:safeguarding and administeringinvestmentsor
securities;dealingin investmentsorsecuritiesasprincipal;anddealingin
investmentsor securitiesasagent.
For thesake of brevity, theterm ―investment firm‖ is used in this
methodology, and should be construedwidelytocover anyfirm that is
classified asan investment firm or a securitiesfirm, including
broker-dealers,under the applicableregulatoryregime.

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―Intervention‖ or ―official intervention‖ – anyactions,includingformal
corrective action, taken by supervisoryor resolution authoritiesin
responseto weaknessesin a financial firm prior toentry intoresolution.
―Legal framework‖ – the comprehensivelegal system for a jurisdiction
established by anycombination of the following:a constitution;primary
legislationenacted by a legislativebody that hasauthorityin respect of
that jurisdiction;subsidiarylegislationadoptedunder the
primary legislationof that jurisdiction;or legal precedent and legal
proceduresof that jurisdiction.
―Protectionscheme‖ – anyscheme or fund that protectsdepositors,
insurancepolicy holders or investors, asthe casemay be, from specified
lossesthat theymight otherwiseincur asa result of thefailure of a
financial firm.
―Public ownership‖ – ownershipor control of an entityby a public
authorityor other emanation of the State.
―Resolution‖ – anyaction takenby a public authority in respect of a firm
that meetsthe conditionsfor entry intoresolution, includingin particular
theexerciseof a resolution powerspecified in KA3, with or without
private sectorinvolvement, withthe aim of achievingone or more of the
statutoryobjectivesof resolution.
Resolutionmay includethe application of proceduresunder insolvency
law to partsof a firm in resolution, in conjunction withtheexerciseof
resolutionpowers.
―Resolution authority‖ – an authority that, either alone or together with
other authorities, is responsible for the resolution of firms established in
itsjurisdiction(includingresolution planning functions).
Referencesin thisdocument toa―resolutionauthority‖ shouldbereadas
―resolutionauthorities‖ in appropriatecases.

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―Resolutionpowers‖ – powersavailable topublic authoritiesunder the
legal frameworkand resolutionregime for the purposesof
resolution, includingin particular those set out in KA3.
―Resolution regime‖ – the elements of the legal framework and the
policies governing the application of resolution powers by national
authorities.
This may consist of sector-specificstatutesand rules,or mayconsist of a
singleregimecoveringall firms.
TheKAs areneutral asto the form of theregime, providedthat all firms
that could be systemically significant or criticalin the event of failure are
subjecttoan effectiveresolution regime.
―Systemically important financial institution‖ – a financial institutionor
group that, becauseof its size, complexityand systemic
interconnectedness,would, in the view of therelevant authorities, cause
significant disruption to thedomestic or broader financial system and
economicactivityif it weretofail in a disorderlymanner.
―Systemically significant or critical‖ – an activity or operation is
systemicallysignificant or critical if itsinterruption, suspension or
discontinuationcould lead toa disruption of servicesvital for the
functioningof thefinancial system or real economy
Executive Summary
Background
Theglobal financialcrisisdemonstratedthe urgent need toimprove
resolution regimessoasto enableauthoritiestoresolvefailingfinancial
institutions(FIs) quickly without destabilisingthe financial system or
exposingtaxpayers tolossfrom solvencysupport.
Followingthecrisis, the FSBpublishedthe KeyAttributesof Effective
ResolutionRegimesfor Financial Institutionsaspart of the packageof
policy measurestoaddressthemoral hazard risksposed bysystemically
important financial institutions(SIFIs).

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TheKeyAttributes(KAs) set out the coreelementsof effectiveresolution
regimesthat applytoany financial institutionthat could be systemically
significant or criticalif it fails.
Resolution regimeshave been identifiedasa priorityareabythe FSB.
As a result, the implementation of the KAs by FSB member jurisdictions
will undergointensivemonitoring and detailed reporting.
Toensure timelyand effectiveimplementation, the FSB will carry out an
iterativeseriesof peer reviewson the implementation of theKAs.
Theobjectiveof this first peer review is toevaluate FSBjurisdictions‘
existingresolution regimes and any plannedchangesto thoseregimes
usingthe KAs asa benchmark.
Thereview comparesnational resolution regimes both acrossindividual
KAs (focusingprimarilyon KAs that cover core provisionsof those
regimes) and acrossdifferent financial sectors(banking, insurance,
securities,and financial market infrastructure(FMIs)).
It providesrecommendationsfor future work by the FSBand itsmembers
in support of an effective and credible resolution regime for SIFIs, which
is a critical component of the policyframework for ending too-big-to-fail.
Main findings
While major legislativereformshave alreadybeen undertaken by some
FSB jurisdictions(particularlythosedirectlyaffectedby the financial
crisis) to develop new, or reviseexisting, resolutionregimes,it is clear
that implementationof theKAsis still at an earlystage.
Thisisnot surprisingastheKAs areanew internationalstandard and the
reforms neededtoimplement them may involve significant legislative
changes.
Several FSB jurisdictionsare in theprocessof adoptingthose reformsto
further strengthen their resolution regimes.

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For example, theproposedEuropean Union (EU) Directiveon recovery
and resolution for banks and investment firms, onceapproved, will
represent a major stepforwardin aligningthe resolution regimesof EU
member stateswiththe KAs.
Resolution regimesacrossFSBmember jurisdictionsexhibit a broad
range of practicesin terms of scope, mandatesand powersof authorities.
This is tobe expected.
TheKAs do not prescribethespecific form of theresolutionregime or
particular type of resolution authorityaslong asthat regime isconsistent
with the KAs.
However, jurisdictionssometimeshavedifferent interpretationsof what
constitutesa ‗resolution regime‘ and itsrelationship toordinary
insolvencyregimesand powersfor ordinarysupervisorypurposes.
This divergencein interpretation can make it difficult to draw definitive
conclusionsabout the alignment of national powersacrossdifferent
sectorswiththe KAs.
Additional clarificationand guidance on the applicationof theKAs is
thereforenecessarytoassist jurisdictionsin implementation, facilitate
monitoring, and ensure consistencyin assessmentsof compliancewith
theKAs.
Anumber of featuresof resolution regimesin FSBjurisdictionsare
broadly consistent withthe KAs.
In particular, all jurisdictions are able to use some of the resolution
powersspecified in KA 3 in relation to banks, although they are not
exercisedin all casesby administrativeresolution authorities.
Nearlyall jurisdictionshaveavailableoneorbothoftheresolutionpowers
specifiedin KA3 for insurers(portfolio transferand run-off), although in
several casesthosepowersare exercisedby a court-appointed
administratoror liquidatorin the context of a windup.

P a g e | 25
Most jurisdictionsaccompanyresolution powerswithsome of the
safeguardsspecifiedin KA5, such asrespect for the hierarchyof claims
and a right for creditorsto judicial review of resolution actions.
Finally, many jurisdictionsreport that theycan achieveat leastsome of
theobjectivesof theKAs through existingsupervisorypowers– for
example, powerstodevelop recovery and resolutionplans(RRPs) or to
requireresolvabilityassessmentsfor certain FIs.
Nevertheless, there aresignificant divergencesfrom, or inconsistencies
with, the KAs that need tobe addressed.
Moreover,additional clarification and guidanceon the application of the
KAs is needed in a number of areastofacilitateprogress.
Themain areaswherefurther enhancement of resolution regimesby
national authorities, or additional guidancebytheFSB and relevant
standard-settingbodies (SSBs), may be necessaryare asfollows:
Comprehensive resolution powersfor banks – KAs 1and 3 (see
recommendation 1a):Although resolution regimesare generallymore
developed for banksthan for other financial institutions,few jurisdictions
haveequippedadministrativeauthorities withthe full set of powersto
resolve banksset out in KA3.
For example, very few authoritieshave the statutorypower both towrite
downand to convert liabilitiesof a failinginstitution(bail-in within
resolution).
Moreover,in some casesresolutionactionsmay require court approval or
thecooperationof thefailing firm or itsshareholders,while inother cases
resolution actions,such asthe transfersof assetsand liabilities,are
carried out by an administratorthat may neither be mandated to achieve
theobjectivesin theKAs nor subject todirectionby theresolution
authority.
Resolutionregimesfor non-bank FIs – KA1(seerecommendations1b
and 2b): Resolution regimesaremost advanced for banksand

P a g e | 26
progressivelylesssofor insurers,securitiesor investment firmsand
FMIs,whereboth mandatesandpowersfall wellshort of thestandardsin
theKAs.
Thisin part reflectsthelessadvancedstateofguidanceontheapplication
of the KAsto thosesectors.
For example, in many FSB jurisdictionsthere is nodesignated
administrativeresolutionauthorityfor securitiesor investment firmsand
FMIs.
Powersfor non-bank FIs are often supervisoryin nature and donot
achievethe outcomesspecified in the KAsor are limitedtofirm
liquidationor windup at theinstigationof the supervisoror, in some
cases,through some form of speciallyadapted insolvencyregime.
Powerstoresolvefinancial groups– KA1.1(seerecommendations
1c, 1d,2c and 2d): Most FSB jurisdictionslack powersto take control of
theparent or affiliatesof a failed FI, problem for G-SIFIs that tend to
haveintegratedand highlycomplex structures.
Further clarityas to the nature of powersneeded for FHCs, non-regulated
operational entities and branchesof foreign FIs would also be desirable to
ensure a consistent approach.
In addition, few jurisdictionshavein placeacoordinationframeworkthat
designatesa lead authority wheretwoor more domesticresolution
authoritiesare responsiblefor resolvingdifferent entitiesof a financial
group within thesame jurisdiction.
Cross-border effectivenessof resolution measures– KA7 (see
recommendations1eand 2e): The financial crisisdemonstrated theneed
tostrengthen arrangementsfor cross-border cooperation in dealingwith
failing FIs.
However,national legal frameworksfor cross-border cooperation in
resolution are, overall, lesswell-developedacrossall sectorsthan other
areasof the KAs.

P a g e | 27
Onlya few jurisdictionscurrentlyempowerand encouragetheir
resolution authoritiesthrough statutorymandatestocooperate and
coordinatewhereverpossiblewith foreign resolution authorities.
Moreover,the abilityof existingmechanismsin many jurisdictionsto
giveeffect to foreign resolutionactionsremainsunclear.
Very few jurisdictionshave provisionsfor expedited(administrativeor
court-based) proceduresforrecognitionandenforcement ofactionstaken
byforeign authorities.
This is a major weaknesssinceit may undermine the legal certaintyof
resolutionactionsin relationtoassetsand liabilitiesin other jurisdictions
andtherebyjeopardisethe effectiveimplementation of resolution
strategiesfor cross-border groups.
Information sharingfor thepurposesof resolution – KAs7.6, 7.7and 12
(seerecommendation1f):Few FSB jurisdictionshaveclearanddedicated
statutoryprovisionsfor domesticauthorities toshare confidential
information with foreign resolution authorities.
While most jurisdictionsrely on existingpowersto disclosenon-public
information for supervisorypurposes,thesepowersmay not be
sufficientlybroad toallowsuch informationto be shared withall
domesticand foreign authoritiesthat are not supervisorsbut have a
responsibilityfor planningor carrying out resolution.
Unlesshome and host authoritieshavethe capacitytoshare such
information, it is unrealisticto expect them tomeaningfullydiscuss
cross-border resolution strategiesand plansor tocooperateeffectivelyin
a crisis.
Treatment of financial contractsin resolution – KA4 (see
recommendation 1g): Resolution authorities in most jurisdictionseither
lack powersto imposea temporary stayon the exerciseof contractual
acceleration or earlytermination rightsinfinancialcontractsthat ariseby
reason onlyof entry intoresolution or in connection withthe exerciseof

P a g e | 28
resolutionpowersor, wherethepowerexists,it is not subject tosuitable
safeguards.
Funding– KA6 (seerecommendation2f):Funding arrangementsdiffer
greatly acrosssectorsand jurisdictions.
Most jurisdictionsrelyon privately funded protectionfundstofinance
resolution actions,but it is not clear whether such arrangementsare
adequateor appropriatein scaleor scope.
Publicfinancial support thereforeremainsan important component of
resolution fundingarrangementsfor SIFIs. Mechanismsfor the recovery
of public fundsare not well developed, while conditionson their use are
largelyabsent.
Recovery and resolution planningand actionsto improve resolvability–
KAs 10and 11(seerecommendations1h,1i and 2g):In most jurisdictions,
thereis noexplicit requirement in statuteor rules for RRPs for domestic
SIFIs.
Moreover,most authorities lack thepowerto require firms tomake
changestotheir organisational and financial structuressolelyin order to
improvetheir resolvabilityand in advance of resolution.
Operational capacityto resolvecomplex SIFIs– KA2 (see
recommendation 2h): Howevergood a resolutionregime might look in
statute, it will not beeffectiveunlessthe national authoritiesresponsible
for resolutionhave the operational capacity– including staff with the
appropriatelevel and rangeof expertise, and adequate resources – to
resolve complex financial groupsand SIFIs.
This critical dimension cannot be verifiedin a desktop exercisesuchas
thepeer review and will need to be assessedin on-siteIMF-WorldBank
country assessmentsusing suitablecriteria in theassessment
methodologyfor theKAs.
Rigorousmonitoring of implementationprogressin aligningresolution
regimesin FSB jurisdictionswiththe KAs(seerecommendation3):

P a g e | 29
Several FSB jurisdictionsare implementingor consideringreformsto
their resolution regimes.
Given the early stage of those reforms, a rigorous monitoring framework
needs to be developed to ensure comprehensive reporting of progress by
jurisdictionsin aligningtheir resolutionregimes with the KAs.
While future ―deep dive‖ peer reviewswill be useful in that regard, they
should be complementedby regular reports using a standardised
template to enhancethe reportingof implementation progressby
jurisdiction, sector and KA.
Recommendations
Basedon theabovefindingsof thepeer review, there are three setsof
recommendationsfor implementation by theFSBitselfor relevant
member jurisdictions(seebelow).
Work on some of therecommendationsaddressed tothe FSB is already
underway.
Most of therecommendationsthat involve actionsbynational authorities
can – and should – beimplementednowwithout waitingfor additional
FSB guidance.
Jurisdictionsmay consider establishing a phased reform program to
addressthe issuesidentified below.
In some cases,earlyworkon resolution planningand resolvability
assessments,includingthe introductionof resolutionplanning
requirementsto all firms that could havean impact on financial stability
in theevent of failure, may reveal specificweaknessesor gapsin the
powersneededfor effectiveresolutionand therebyassist jurisdictionsin
thedevelopment of such a program.

P a g e | 30
Recommendation 1:Full implementation of the KeyAttributes
(KAs)
FSB member jurisdictionsshould undertake the followingactionsto
introduce,or revisetheir existing, resolution regimesfor financial
institutionsin order tofullyimplement the KAs:
a.Reviewing, and revising asneeded, resolution regimesfor banksto
ensure that all the powersset out in KA3, includingpowerstotransfer
assetsand liabilitiesand powersto write-downand convert debt within
resolution, areavailableto administrativeresolutionauthorities;
b.Reviewingthe adequacyand effectivenessof resolution regimesfor
non-bank FIs, and adopting any necessary reforms toensure that
administrativeresolutionauthoritieswith adequate powersare
designatedfor thoseinstitutions;
c.Extendingthe scope of resolution regimestofinancial holding
companies, non-regulated operational entitiesthat are significant to the
critical functionscarried out within the group, and branchesof foreign
financial firms;
d.Wheremultipleresolutionauthoritiesexist, strengtheningcoordination
frameworksand designatinga lead authority for resolving domestic
entitiesof thesame group;
e.Enhancingthe mandatesand capacityof resolution authoritiesto
cooperateand coordinatemeasuresacrossborders;
f.Reviewingthedomestic legal frameworkfor information sharing, and
revisingit asneededto ensure that domestic authoritiescan share
information with all relevant domesticand foreign authorities for
planningand carrying out resolution;
g.Introducingpowersto impose a temporarystay on the exercise of
contractual acceleration or earlytermination rightsin financial
contracts,subject tosuitablesafeguardsasdescribedin KA4 andAnnex
IV to theKAs;

P a g e | 31
h. Introducinga RRP requirement for all domesticallyincorporated firms
that could be systemically significant or criticalif theyfail; and
i. Empoweringsupervisoryor resolution authorities torequire financial
institutionsto adopt changesto their structure, organisation or business
practiceswhereit isnecessaryto improve their resolvability.
Recommendation 2:Additional clarification and guidance on
the application of the KAs
TheFSB should provideadditional clarificationand guidanceon the
application of the KAs to assistjurisdictionsin implementation, facilitate
monitoring, and ensure consistencyin assessmentsof compliancewith
theKAs, by:
a.Clarifying thenature of resolution powersascomparedwiththe
ordinarycorporateinsolvencyregimeandpowersfor ordinarysupervisory
purposes;
b.WorkingwithSSBs to develop guidanceon the featuresand powers
necessaryfor resolution regimesin each non-bank financial sector to
meet the standardsof the KAs;
c.Developing guidance on the nature of powersneeded for FHCs,
significant non-regulatedoperational entities,and branchesof foreign
financial firms;
d.Developingguidanceand identifying good practicesfor coordination
wheretwoor more domestic resolution authorities are responsiblefor
resolving entitiesof the same financial group;
e.Takingstock of mechanismsto giveeffect to foreign resolution
measures– such asadministrativeand judicialpowersof recognitionand
contractual mechanismsrequiringcounterpartiestorecognise the
exerciseof powersbya foreign resolutionauthority– and evaluatingtheir
effectiveness(e.g. in terms of timingand predictability) in the
implementationof cross-border resolution strategies;

P a g e | 32
f.Takingstock of resolution fundingarrangementsacrossjurisdictions
andidentifying good practicessothat temporarypublic fundingdoesnot
giverisetomoral hazard andissubjecttoconditionsand mechanismsfor
recoveryfrom privatesector sources;
g.Clarifying thenature and scope of the powersthat authoritiesshould
haveto require firms to take measurestoimprove their resolvability; and
h.Ensuring that theassessment methodology for the KAscontains
suitablecriteria toassesstheoperational capacityof resolution
authorities.
Recommendation 3: On-going implementation monitoring
TheFSB should undertake monitoring and reportingon the
implementationof theKAsby:
a.Developing a standardised reporting templatetofacilitatethe analysis
of implementationprogressby jurisdiction, sector and KA;
b.Undertaking follow-up peer reviews focused on resolution powers,
cross-border cooperation and information sharing, and recovery and
resolutionplanning; and
c.Carrying out, in coordination with relevant SSBs, peer reviewson the
application of the KAs toindividual non-banking sectors(insurance,
investment and securitiesfirms, FMIs) once relevant guidanceby those
bodies isissued.
I. Introduction
1.Background
Theglobal financialcrisisdemonstratedtheurgent need toimprove
resolution regimessoasto enableauthoritiestoresolvefailingfinancial
institutionsquicklywithout destabilisingthefinancialsystem orexposing
taxpayers to lossfrom solvencysupport.

P a g e | 33
Followingthecrisis, a number of jurisdictionshave adopted, or are
currentlypreparing, legislationto strengthentheir resolutionregimes,
while some progresshas alsobeen madein establishingcrisis
management groups(CMGs) for global systemicallyimportant financial
institutions(G-SIFIs)and enhancingcross-bordercooperation.
TheFSB adopted theKeyAttributesof EffectiveResolution Regimesfor
Financial Institutionsin November 2011aspart of thepackageof policy
measuresto addressthemoral hazard risks posedby SIFIs.
TheKeyAttributes(KAs) represent anew internationalstandard that sets
out thecore elementsof effectiveresolutionregimesthat applyto any
financial institutionthat could be systemically significant or criticalif it
fails (seeBox 1).
Work is ongoingacrossa number of resolution-relatedwork streams.
Theseincludethe development bythe FSBof an assessment
methodologyfor theKAs whichcontainsexplanatorymaterial and
additional guidanceon variousaspectsof recovery and resolution
planning;and workby the relevant standard-settingbodies(SSBs) –
namely, the Committeeon Payment and Settlement Systems (CPSS) and
theInternational Organisationof Securities Commissions(IOSCO), and
theInternationalAssociation of InsuranceSupervisors(IAIS) – on,
respectively, the applicationof the KAs tofinancial market infrastructure
(FMI) and insurers.
Resolution regimeshave been identifiedasa priorityareaunder the FSB
Coordination Frameworkfor ImplementationMonitoring.
As a result, the implementation of the KAs by FSB member jurisdictions
will undergointensivemonitoring and detailedreporting.
Toensure timelyand effectiveimplementation, the FSB will carry out an
iterativeseriesof peer reviewson the implementation of theKAs.

P a g e | 34
Box 1:KeyAttributes of Effective Resolution Regimes for
Financial Institutions
TheKeyAttributesset out thecoreelementsthat theFSBconsiderstobe
necessaryfor an effectiveresolution regime.
Their implementationshould allowauthoritiesto resolve financial
institutionsin an orderlymanner without taxpayer exposure tolossfrom
solvencysupport, while maintainingcontinuityof their vital economic
functions.
Theyset out essential featuresin twelveareasthat should bepart of the
resolution regimesof all jurisdictions,whichrelate to:
1. Scope
2. Resolutionauthority
3. Resolution powers
4. Set-off, netting, collateralisation, segregation of client assets
5. Safeguards
6. Funding of firms in resolution
7. Legal framework conditionsfor cross-border cooperation
8. CrisisManagement Groups(CMGs)
9. Institution-specificcross-border cooperationagreements(COAGs)
10. Resolvabilityassessments
11.Recovery and resolution planning
12. Accessto information and informationsharing.
Not all resolution powersset out in the KeyAttributesare suitablefor all
sectorsand all circumstances.
Topromoteeffectiveand consistent implementationacrossjurisdictions
theFSBwill continueto workwithitsmembersto develop further
guidance,takingintoaccount the need for implementation to
accommodatedifferent national legal systems and market environments
and sector-specificconsiderations(e.g. insurance, FMIs).
TheKeyAttributesalsocontain specific requirementsfor resolvability
assessments,recovery and resolution planning, and the development of

P a g e | 35
COAGs betweenhome and host authorities, whichmust be met for
G-SIFIs.
AnnexesI toIV of thedocument providemore specific guidancetoassist
authoritiesin implementingthe KeyAttributes with respect to:
• COAGs (Annex I)
• Resolvabilityassessments(Annex II)
• Recovery and Resolution Plans(Annex III)
• Temporarystays on earlyterminationrights(Annex IV).
2. Objectives and scope of the review
Theobjectiveof thepeer review isto evaluate FSB member jurisdictions‘
existingresolution regimes and any plannedchangesto thoseregimes
usingthe KAs asa benchmark.
Thereview providesa comparativeanalysis of the overall legal,
institutional and policy frameworkof existingresolution regimes, both
acrossindividual KAsand acrossdifferent financial sectors(banking,
insurance,securities or investment firms, and FMIs).
In doing so, the review hasmade useof the draft assessment
methodologyfor theKAs that iscurrentlyunder preparation.
Thebroadscopeof thereviewismotivatedbythefact that it isthefirst in
a number of proposed thematic peer reviewsin this area.
Sincethe KAswereonlyrecentlydevelopedasan international standard,
their effectiveimplementationwill require substantial follow-upworkby
national authorities, SSBs and firms, includinglegislativechangesin
manyjurisdictions.

P a g e | 36
The review focuses primarily on those KAs that cover the core provisions
of national resolution regimes applicable to any financial institution that
could be systemicallyimportant or critical if it fails.
TheseareKA1(scope of resolution regime), KA2 (existence, mandate
and governanceof resolution authorities), KA3 (resolutionpowers)and
KA6 (fundingarrangementstosupport resolution).
Thepeer review alsocoversother provisionsin national resolution
regimesin lessdepth soastoavoid unnecessaryoverlapswithwork
undertaken by other FSB workstreams.
TheseincludeKA4(legalframeworkgoverningset-offrights, contractual
netting, collateralisationarrangements,and segregation of client assets),
KA5 (existenceof safeguards), KA7 (legal frameworkfor cross-border
cooperation), and KA12(accesstoinformationand information sharing).
KA10 (resolvability assessments) and KA11(recovery and resolution
planning) arecoveredonlyasregardstowhethernationalauthoritieshave
developed frameworksfor carrying out resolvabilityassessmentsand
recoveryand resolution planningfor financial institutions(FIs) in their
jurisdiction.
Thereview doesnot examinethe implementationof thoseattributesfor
individual G-SIFIs and doesnot includeKA8 (crisismanagement
groups) and KA9 (institution-specific cross-border agreements) that
applyonlyto G-SIFIs.
Thedepth of coverageacrosssectorsreflectsdifferencesin reformsto
resolution regimesand progressin policyworkby relevant SSBsacross
thosesectors.
Asignificant part of the review is dedicatedto banking, sincemost of the
resolution-relatedreformsin recent yearshave been focusedon that
sector.
Thereview givesdueconsiderationtosectoral specificitiesand
recognisesthat not all powersand characteristicsof resolution regimes

P a g e | 37
set out in the KAsare suitableor relevant for all sectorsand under all
circumstances.
The primary source of information for the peer review is the responses to
a questionnaire by FSB member jurisdictions, which was mostly based on
essential criteria set out in thedraft assessment methodology.
Thereview alsomadeuse of availablereportsor guidanceby SSBs
relatingtoresolution-relatedconsiderationsfor specificsectors.
Thereport and itsAnnexesare structured asfollows:
•SectionII andAnnexAreviewtheresolution-relatedactionsundertaken
in responsetothe global financial crisis, includinglessonslearned and
legislativereformsinitiatedduring or in the aftermath of thecrisis;
•Section III describesthe main featuresof existingresolution regimes,
organisedby KeyAttribute, and issupplemented by further detail in
AnnexesB and D;
•Section IV andAnnex C summariseplannedresolution regimereforms
byFSB jurisdictions;and
•SectionV summarisesthekey findingsand providesrecommendations
topromote thetimelyand consistent implementationof theKey
Attributes.
II. Actionsundertaken in response to the financial crisis
During the financial crisisthat began in 2007, most FSB member
jurisdictionstook policy measuresto support and enhanceconfidencein
their domestic financial system.
Anumber of thosejurisdictionsalsotook actions– often on an ad hoc
basis– tointervenein, resolve, restructure or wind up financial
institutions(FIs) deemed systemically significant.
Most of theaffectedFIs werebanks.

P a g e | 38
In some cases,thebankswererelativelysmall and domestically
oriented, but weredeemed to be systemic in theprevailingfinancial
market environment.
Most of thosejurisdictionstook action under existingsector-specific
powersto restructureand wind-up failingFIs.
In a number of casesthosepowersand authoritiesproved
inadequate, leadingsome jurisdictionstoadopt emergencylegislation
to enablethe necessaryresolution actions.
In the United Kingdom (UK), emergencylegislationenabled the
resolutionof several banksthrough nationalisation, thetransfer of
depositsand assetstothird partiesand the establishment of bridge banks;
thetime-limitedemergencylegislationwassubsequentlyreplaced with a
new statutoryspecial resolution regime.
In the United States(US), emergencylegislationenabled thepurchaseof
troubledassetsfrom FIs.
Germanyrecapitalisedbankswith state fundsand restructured
them, includingby transferringbad assetstoasset management
companies(AMCs) through a newlyestablishedagencythat providedthe
necessaryfundingand acted asumbrella for theAMCs.
TheNetherlandsadoptedlegislation for therecapitalisationor transfer of
assetsand liabilitiesof banksor insurerstoanother FI or a bridge
institution and the interventionin a parent or holding company.
TheSwissauthoritiesreinforcedthe capital base of a systemic bank by
subscribingto mandatory convertiblenotesand financingthetransfer of
someof thebank‘silliquid assetsto a special purpose vehicle;these
actionswereimplementedthrough emergencylegislation.
Franceadoptedlegislationallowingstatefinancial support tobeprovided
toFIs.

P a g e | 39
Russia adopted a special resolution regime for systemically important
banks empowering the deposit insurer to provide capital and liquidity
support.
Spainadopted legislationestablishinganewresolution authority withthe
powertorecapitaliseand restructure banks;several smallerbankswere
granted capital and liquiditysupport, and weresold to other bankswith
assistancefrom the resolutionauthorityin the form of asset guarantees
and capital and liquiditysupport.
Financingfor the resolution and restructuring of failing FIs came from
public sources– generallynational governmentsandcentral banks– with
onlylimited recourseto the privatesector.
France, Netherlandsand the UK reliedsolely on treasury financing.
Russiarelied on contributionsbythe treasuryand loansby thecentral
bank totheresolution authority.
Somejurisdictions,includingFrance, Germanyand Spain, established
special public entitiesto provide fundingand expertise.
Afew jurisdictionsalsoreported theuseof private sector fundsfor
resolution actions,mainlyasa result of using industry-funded deposit
insurancefunds.
TheUS relied on a combination of treasury, central bank and deposit
insurer funds.
Most jurisdictionsintend to recoup financial assistanceby thesaleof FIs
and assetsacquired in thecourseof resolution actionsand toreplenish
deposit insurancefundsthrough industrycontributions.
Thefinancialcrisishighlightedtheneedtosignificantlyenhanceexisting
resolution regimesin FSB jurisdictions.

P a g e | 40
Implicit relianceon public support wasshownto be a policy that
penalisedtaxpayers, contributedtomoral hazard and wasnot viablein
thelong term.
Many jurisdictionsrecognisedthe need toenhanceresolution powers,
undertake more formal recovery and resolution planning, strengthen
arrangementsfor domestic and cross-border cooperationin dealing with
failing FIs, and develop mechanismstorecoupany publicfundsused in
resolution.
Somejurisdictions,particularlythosethat weredirectlyaffectedby the
financial crisis,drew the lessonthat the general corporateinsolvencylaw
wasnot suitablefor resolving systemic FIs, and have alreadyundertaken
major legislativereforms todevelop new, or revise their existing,
resolution regimes.
These reforms include measures to introduce new resolution tools and to
expand resolution authority to non-bank financial institutions (see Annex
A).
Several other jurisdictionsare implementingor consideringreformsto
their regimes(seesection IV).
III. Key featuresof resolution regimes
This section summarises the key featuresof resolution regimesof FSB
member jurisdictionsby individual KA.
This summary iscomplemented byAnnexesB and D, whichrespectively
set out selected and detailed featuresof resolution regimesin FSB
jurisdictions.
1. Scope of resolution regimes (KA 1)
KA1requiresthat all financial institutionsthat could be systemically
significant or criticalin the event of failure, includingbanks, securities

P a g e | 41
and investment firms, insurersand FMIs, be subjecttoa resolution
regimethat hasthe featuresset out in theKAs.
In order tobecapableof resolvingfinancialgroups,thoseregimesshould
extendto branchesof foreign FIs, financial holding companies (FHCs),
and non-regulatedoperationalentitiesthat are significant to thebusiness
of a financial group.
All FSB jurisdictionsreport that theyhave specific powersto restructure
and/ orwindup banksthat are distinct from ordinary corporate
insolvency(seeTable1Ain Annex D), although theextent towhichthe
sector-specificregimesdiffer from ordinary corporateinsolvencyis not
alwaysclear.
Eight jurisdictionsreport that theuseof certain powersisrestrictedto
systemicallyimportant banks.
Most jurisdictionsalsohave speciallyadapted insolvencyregimesfor
insurancefirmsthat typically rely on a combination of ordinary
insolvencylaw supplemented by powersfor supervisoryauthorities(see
Table1B in Annex D).
Resolution regimesfor securitiesor investment firms and FMIs are even
lesswell established.
ThirteenFSBjurisdictionsindicatethat theyhave specific powersto
restructure and/ or wind up securitiesor investment firmsoutsideof
ordinarycorporateinsolvency(seeTable1CinAnnex D), whileonlyeight
jurisdictionsreport having sector-specificpowersin placefor
restructuring and/ orwindingupall orsomeclassesofFMI (seeTable1D
in Annex D).
Three of thosejurisdictions18notethat, wherecertain FMIs (suchas
CCPs) are authorised asbanks, theyarecurrentlywithinthescopeof that
jurisdiction‘sbank resolution regime.

P a g e | 42
Work is ongoing by CPSS and IOSCO to clarify how the KAs should be
applied to FMIs, so as to provide a basis for jurisdictionsto design and
implement resolution regimesfor this sector.
It should be emphasised, however, that sector-specific powersto
restructure and/ or wind up FIsare not necessarilyalignedwith theKAs.
In many cases,the reportedpowersare supervisory in nature, require the
consent of shareholdersor are limitedtoliquidationor windingup of the
firm at the instigationof the supervisor or, in some cases, through some
form of speciallyadapted insolvencyregime.
Thiswasespeciallythecasein relationtotherangeof powersavailablein
manyjurisdictionsin respect of insurers, securitiesor investment
firms, and FMIs.
Thesetypes of powersare useful supplementstothe core resolution
powersoutlinedin KA3 but do not constituteon their own a resolution
regimethat meetsthestandardsof theKeyAttributes.
While manyjurisdictionsreport that theyhave specific powersto
restructureand windup holdingcompaniesthat areregulatedasbanking
or insurancegroups,only eight of them havethe abilityto usethose
powersfor FHCsthat are not themselvesa bank or other regulated
institution.
Such a restriction wouldlimit the resolution strategiesavailableto deal
with a financial group, and appropriateresolutionpowersshould
thereforeapply more broadlytonon-regulated FHCs.
In most FSB jurisdictions,theresolutionframework cannot be appliedto
non-regulatedoperational entitieswithin a financial group.
Authoritiesin only seven jurisdictionshave directpowersin relationto
non-regulatedoperational entitiesthat can be exercised in theresolution
of the wholeor a part of thefinancial group or conglomeratetowhich
thoseentitiesbelong; the nature of thosepowersalsovariesacross
jurisdictions.

P a g e | 43
Non-regulatedoperational entitiesmayprovideservicesthat are
necessaryfor thecontinuityof systemically important functionscarried
out withinthe group, and a lack of appropriate powersin relationto such
entitiesmay result in an abrupt withdrawalof those servicesthat
jeopardisesthe resolution objectiveof maintainingthosefunctions.
In a majorityof cases,authoritiesreport that theyhave powersover
branchesof foreign financial institutions.
In some cases, thosepowersare limitedtoactionsunder theordinary
corporateinsolvencyregime (such asthepower toring-fencelocalassets
and realisethem tomeet the claimsof creditorsof thebranch) under the
jurisdictionor supervision of domesticcourts.
In many jurisdictions,powersin respect of branchesare much less
comprehensivethanthose available for locallyincorporatedentities(see
KA7).
2. Resolution authority (KA2)
KA2requiresjurisdictionstohavea designated administrativeresolution
authority(or authorities) that is (are) operationallyindependent and
adequatelyresourced.
Thestatutoryobjectivesand functionsof resolutionauthoritiesshould
requirethem topursue financial stability, protect depositors,insurance
policy holdersand investors(asappropriate); avoid unnecessary
destruction of value;and consider thepotential impact of their actionson
financial stabilityin other jurisdictions.
Where there is more than one resolutionauthorityin a jurisdiction, their
rolesshould be clearlydefinedand coordinated, and theresolution
regimeshould identifya lead authority tocoordinateresolutionof a
multi-sectorfinancial group withinthat jurisdiction.
Responsibilityand powersfor the resolution of (at least some) FIsare
conferred on one or more public authorities in all FSB member
jurisdictions(seeTable1).

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Thedivision of resolutionpowersand responsibilitiesbetweenthose
authoritiesvariesconsiderably:theKAsarenot prescriptiveinthisregard.
Many jurisdictionsconfer the primary responsibilityand powersfor the
resolutionof bankson supervisory authoritieswithdifferent degreesof
functional separation, whilethe resolutionauthority is separate from the
main sectoral supervisor in onlya minority of cases.
While all FSB jurisdictionsreport that their resolution authoritiesare
operationallyindependent, thishasnot been verified in the peer review.
For theinsurancesector, almost all FSB jurisdictionscurrentlyhave
prudentialsupervisorsthat canintervenein troubledorfailinginstitutions
in a variety of ways(such aslicensewithdrawal, appointment of
administrator,or court petition for windingup), although most
jurisdictionsrequire the courtsto appoint an administratoror liquidatorto
carry out the resolution.
In many FSB jurisdictions,there isno administrativeauthority
responsiblefor restructuringand windingup securitiesor investment
firmsand FMIs.
This reflectsthelimitedscope and powersfor resolving systemically
important non-bank SIFIs under theexistingregimes(seethe discussion
in KAs 1and 3).
Theinvolvement of public administrativebodies in thosesectorsrelates
totheir role asmarket conduct or oversight authorities,withmeasuresto
addressor managefailinginstitutionstypicallylimited to standard
insolvencyprocedures.
Indeed, in many caseswherejurisdictionsreport theexistenceof a
resolution authorityfor securitiesor investment firms and FM Is, that
authorityis actuallya supervisorthat isonly able toexercisecertain
powersunder a sector-specific regime for restructuring or windingup, but
doesnot havetheadministrativeresolution powersspecified in KA3.

P a g e | 45
As previouslynoted, there are a few exceptionswherethe responsible
authorityhaspowersin relationto certain categoriesof FMI that are
similar to thosefor other types of FI.
TheKAs recognisethat not all attributesand resolution powersare
relevant for all financial sectors;howeverthedesignation of an
administrativeauthorityorauthoritieswiththeresponsibility, powersand
meansto resolvesystemically important firmsis an essential element of
an effectiveregime acrossall sectors.
While resolution measuresmay be implementedby an administratorthat
is appointed and supervised by a court (asis thecasein several FSB
jurisdictions), the objectivesof that administrator should be aligned with
KA2.3.
In thosejurisdictionswithmultipleresolutionauthorities, nearlyall
report havingsome form of coordinationarrangementsin placebetween
theauthorities,although the adequacyof thosearrangementshasnot
been analysed in the peer review.
However,several jurisdictionsdonot appoint a ‗lead authority‘to
coordinatetheresolution of domesticentitiesof the samegroup.
Theresponsesof somejurisdictionsindicatethat theboundariesbetween
therespectiverolesand responsibilitiesof those authoritieswith
resolution functionsare not alwaysclear, whichmay hamper effective
resolution.
Very few jurisdictionshave statutory objectivesin placefor their
resolution authoritiesthat arefullyalignedwiththeKAs.
However,many such authorities(includingprudential supervisors,
market conduct authorities, central banks, financeministries,deposit
insuranceand other protectionschemes) may havebroader
responsibilitiesrelatedto financial stability, and the objectivesrelatingto
their rolein resolution may not necessarily be reflectedin a separate
statuteor other public policydocument.

P a g e | 46
Although nearlyall authoritieshave formal objectives(oftennot related
specificallyto their resolution functions) tomaintain financial stability
andprotect depositorsor policyholders, most do not have mandatesto
avoid destruction of value (beyond maximisingrecoveriesin liquidation)
or toconsider theimpact of resolution actionson other jurisdictions.

P a g e | 47
3. Resolution powers(KA 3)
KA3 setsout therangeof resolutionpowersthat should be availablein
resolution regimes.
Theseincludepowersto transfer assets, rightsand liabilitiesof, or shares
in, failing institutionsto a purchaser, bridgeinstitutionor asset
management company(AMC);towritedownandconvert debt ofthefirm
inresolution(bail-in);toappoint anadministrator;andtooperatethefirm
in resolution and takeactionsnecessarytorestructureor winddown its
operations.
Authoritiesresponsiblefor resolving insurersshould alsohavepowersto
transferportfoliosand ―run-off‖ theinsurance businessof a firm in
resolution.
All powersshould beexercisablewithout any requirement for creditor
consent or shareholderapproval.
Regimesshould provide for resolution tobe triggered when a firm is, or is
likely to be, no longer viable, and before it is balance-sheet insolvent and
theequityhasbeen fullywipedout.
MostFSB jurisdictionsreport that theyareabletoprovidefortimelyentry
intoresolution or theexerciseof resolution powersat or before thepoint
of non-viability, and before thefirm isbalance-sheetinsolvent. In most
cases,thereportednon-viability triggersfor insurers,securitiesor
investment firmsand FMIs applylater than for banks,which may be due
tothe fact that theyreflect triggersavailableunder corporateinsolvency
regimes.
Jurisdictionsreport that resolution powersare considerably more
developed for banks(seeTable2) than for insuranceand, especially, for
securitiesor investment firms and FMIs.
While some of the resolution powersspecified in theKAsmay not be
necessarytoresolvecertain typesof non-bank FIs,no special powers

P a g e | 48
(outsideordinary insolvency) are availablefor securitiesor investment
firmsand FMIs in most jurisdictions.
In all FSB jurisdictions,a supervisoryor resolution authorityhasthe
powertoappoint anadministratoror toapplytothecourt for such an
appointment (seeTable2 in Annex D).

P a g e | 49
Thepowersof that administratorvary, but most jurisdictionsreport that
theadministratorhasa widerangeof powers,includingto operatethe
firm and to manageor dispose of its assets.
In some cases,thepowersof the administrator are restricted tothe
powersof the firm‘s management, whichsuggests that the administrator
cannot overrideshareholders‘rightsfor actionsthat require shareholder
approval under the constitution of theFI or applicablecorporate law.
In other cases,the administratorhasthesamepowersastheappointing
authority, or the authorityis ableto confer such powerson the
administrator.
Most jurisdictionsalsoprovidefor powerstotransferassetsand liabilities
from a failed bank.
However,in many casesthosepowersare exercisedby the appointed
administratorand it is not clear whetherthe administratorcan be
mandatedtoachievetheobjectiveslaid out in theKAs.

P a g e | 50
It is also not clear in all caseswhether transfer powers can be exercised (if
not sanctioned by the court) without the need for shareholder approval or
creditorconsent.
Transferpowersaregenerallylesswell-establishedin thecaseof insurers,
and even lesssoin the caseof securities or investment firmsand FMIs.
In a majorityof jurisdictions,authoritieshave the power to establish and
operatea bridge institution, although that poweris not alwaysbasedon
expressstatutoryauthority.
In most caseswheretheuseof a bridgeinstitutionisavailable, it is used
onlyforbanks;relativelyfew jurisdictionsreporthavingbridgepowersfor
insurers,securitiesor investment firmsor FMIs.
Similarly, in amajorityof jurisdictions,authoritieshave the powerto
establishan asset management company, and totransfer assetsof a
failing entityintoit although, aswithbridgeinstitutions,this poweris
largelyconfined tothe banking sector.
Bail-in within resolution, ascontemplated by the KAs, requirespowers
that enableauthoritiesto:
(i)writedown equityin and unsecured creditorclaims againsta firm in
resolutiontotheextent necessaryto absorb the lossesof thefirm; and
(ii)convert all or partsof unsecured creditor claimsintoequityof thefirm in
resolution, its parent company or any successor in resolution (such as a
bridge institution).
Onlytwojurisdictionsreport that bothpowersareconferredbystatuteon
their resolution authority, while another jurisdictionreportsthat it is able
toboth writedown and convert liabilitieswithin resolution usingother
powers.
Several other jurisdictions report that they can achieve, at least to some
degree, the economic effect of bail-in through existing powers, such as
transfer and bridge bank powers,although thosepowersaloneare not

P a g e | 51
fullyequivalent tothebail-inwithinresolutionpowerthat is specifiedin
theKAs.
Powersfor a resolution authority towritedownand convert liabilitiesare
generallynot availablefor insurers,securitiesor investment firms and
FMIs.
In some cases, jurisdictions reported that the use of (at least some)
resolution powers requires the cooperation of the failing firm or its
shareholders.
This is not consistent withthe concept of a resolutionpower under the
KAs and is insufficient for thepurposesof a resolution regime.
It is critical for effectiveresolution that all resolution powersbe
exercisableby authoritieswithout any needfor shareholder consent or
triggeringany other third partyrights(subjecttothe safeguards
describedin KAs 4 and 5).
This is becauseresolution authoritiesmust be ableto take action, which
may includeinterferingwiththird partyrightsquickly and without the
consent of shareholders,creditorsor other stakeholdersof thefirm.
At least one of the twospecific resolution powersfor insurers(portfolio
transferand ‗run-off‘) is availablein nearlyall FSB jurisdictions,although
in some jurisdictionsthe powersare onlyexercisableby the liquidatorin
insolvencyproceedings.
In many jurisdictions,resolutionpowersare distributedacrosstwoor
more authorities.
In other jurisdictions,includingsome that have a singleresolution
authority, the exerciseof resolution powersmay require a court order or
confirmationtobe effective.
While thisis not inconsistent withthe KAs, a requirement for court
approval may impederapid interventionand the abilityto achievethe

P a g e | 52
specifiedobjectivesof resolution, and may be uncertain astothe
outcome.
This is recognised by KA 5.4, whichrequires authoritiestotake account
of the timeneeded for court processesin resolutionplanning soasnot to
compromiseeffectiveimplementationof resolution measures.
However,anassessment ofthat requirement wasbeyond thescopeofthis
peer review.
4. Set-off, collateralisation, segregation of client assets(KA4)
KA4 requires that resolution authoritieshave the powerto imposea
temporarystay on theexercise of accelerationand earlyterminationrights
infinancial contractsthat aretriggeredbyentry in resolutionorthe
exerciseof resolution powers.
That stayshouldbesubjecttothesafeguardsspecifiedinAnnex IV tothe
KAs, includingstrict limitationintheperiod ofthestay, applicationofthe
‗no cherry-pickingrule‘, and preservationof earlyterminationrights
triggeredby defaultsother than entry intoresolution(such asa failure to
make payment or deliver margin).
Onlyfour jurisdictionscurrentlyprovide for the imposition of a temporary
stay on the exercise of contractual acceleration or early termination rights
in financial contracts(seeTable2).
In all of thosejurisdictions(except for theUS in caseswherethe FDIC
hasbeen appointedasreceiver) thepower is limitedtobanks, while only
threejurisdictionsprovide for safeguardsfor counterpartiestofinancial
contractscomparable to thosespecifiedinAnnex IV to the KAs.
Where a power toimposeastay on earlytermination rightsin financial
contractsisnot accompaniedbyadequatesafeguards,thisfailstoachieve
theintended balancebetweeneffectivetransfer powersin relation to
financialcontractstopreservevalueandcontinuityof criticalservicesand
minimisingdisruption to counterparties.

P a g e | 53
5. Safeguards(KA 5)
KA5 setsout a number of legal safeguardsfor personsaffectedby
resolution actions,and in particularcreditorsof a firm in resolution.
These require respect for the hierarchy of claims in resolution; departure
from the principle of equal treatment of creditors of the same class onlyin
accordance with specified principles; rights to compensation for creditors
that are worse off in resolution than they would have been in liquidation;
and a right tojudicial review of resolution actions.
Almost all memberjurisdictionsreportthat their legalframeworksrequire
resolution authoritiesto respect the hierarchyof claimswhen exercising
resolutionpowers(seeTable4 inAnnex D), although it is not clear in
every casewhetherthoseframeworksapply outside of corporate
insolvency.
Only a few FSB jurisdictions report that resolution authorities have the
power to depart where necessary (e.g. for reasons of financial stability)
from the general insolvency principle of equal treatment of creditors of
thesameclass(pari passu).
Very few jurisdictionsprovidean explicit statutoryright to compensation
for any creditorthat is worseoff in resolutionthan wouldhave been the
casein liquidation, and set out a mechanism for administeringany such
compensation.
This right wouldbe particularlyrelevant wherethe regime alsopermits
departure from theprincipleof equal treatment of creditorsof thesame
class(and that departure resultsin somecreditorsbeingworseoff than in
liquidation) or in theunlikely circumstancethat insolvencywouldhave
resultedin lessdestruction of valuethan the resolution action that was
taken.
There aredifferencesacrossFSBjurisdictionsin therightsto judicial
review of resolution actionsand the formsof redressavailableunder their
legal frameworks.

P a g e | 54
Themajorityof jurisdictionsprovide a right to such judicial review either
under general administrativelaw or asan explicit right under the
resolution regime and, in most cases,remediesother than monetary
compensation areavailable.
In such cases,thelegalframeworkneedstostrike anappropriate balance
betweenprotected legal remedieson the onehand and the certaintyof
resolution and the effectivenessof themeasurestaken on theother.
6. Funding of institutionsin resolution (KA6)
KA6 requires jurisdictionstohave adequate arrangementsfor funding
resolution from private sources(such asdeposit insuranceor resolution
funds) or temporary public funding.
In order toreducemoral hazard, any provision of temporarypublic
fundingshould be subject to conditionsand mechanismsfor recovery
from thefirm itself, its creditorsor theprivatesector.
In general, resolution funding arrangementsare available for banks, but
lesssofor insuranceand securitiesfirms, and are largely non-existent for
FMIs(seeTable5 inAnnex D).
Arrangementstofund the resolution of banksare generallybasedon a
mix of private and public sources.
Amajorityof jurisdictionsreport theexistenceofprivate sectorsourcesof
fundingfor resolution purposes, although their current adequacyfor
resolving failing SIFIs hasnot been examined.
Specifically, three FSBjurisdictionshaveprivatelyfundeddedicated
resolution funds, while fifteen jurisdictionshave a deposit insurance
system (fundedeither ex anteor ex post by industry levies) that may be
drawnon to fund bank resolution, in additionto pay-out.
Where a deposit insurancefund can be used to support resolution
measures,it is generallysubject to conditionssuch aslimitationson the
purposefor whichthosefundsmay be used or capsin the amount that

P a g e | 55
can be used for a specific resolution (e.g. no more than theamount that
wouldhave been available topay out depositors).
Policyholder or investment protection fundshave been establishedin
some jurisdictionsbut play a limitedrolein fundingresolution for
insuranceor securitiesor investment firms.
Fourteen jurisdictionshave a protection fund for insurancepolicyholders
or investors,but several of them restrict usetocompensation of
policyholders or investorsin a liquidationscenario and donot allowthe
fund to be usedfor financingthe resolution.
No jurisdictionsreportedhaving a resolution fund dedicated to FMIs.
Notwithstandingtheexistenceof privatesourcesof funding, public
financial support remains an important component of resolution funding
arrangements.
While themajorityof FSB jurisdictionsindicatethat public fundingfor
resolutionmeasuresis available, particularlyfor banks, in only one case
thistakesthe form of a dedicated, publiclysourcedresolution fund.
Mechanisms for recovery of public funds from shareholders, participants
or creditors of the failed firm, or the wider financial industry, are lesswell
developed, although several jurisdictionshave facilitiesfor appropriations
orleviestorecouponanexpostbasisanypublic fundsusedinresolution.
In addition, conditionson the useof public funds(for example, a
requirement that lossesshould be borne by shareholdersand unsecured
creditors)are largely absent.
7. Legal framework for cross-border cooperation (KA 7)
KA7 requires that resolution authoritiesare empoweredand encouraged
bystatutorymandateto achievea cooperativesolution withforeign
authoritieswhereverpossible,includingby exercisingpowersin relation
tobranchesof foreign FIsto support foreign resolution measuresand

P a g e | 56
sharinginformationwith foreign authorities for the purposesof planning
and carrying out resolution.
Legislative frameworks should not contain provisions whereby automatic
actionsin relation to a firm are triggered by the initiation of insolvency or
resolutionproceedingsin another jurisdiction.
Tofacilitatecooperation, jurisdictionsshouldprovidefor transparent and
expeditedprocessestogive effect toforeign resolutionmeasures,either
bywayofproceduresformutual recognitionorbyusingpowersunderthe
domesticframeworkto take measuresthat support and complement the
foreign resolution in relationsto localoperationsof the firm.
Theresolutionregime shouldalsoconfer powersover branchesof foreign
firms, whichmay beused either tosupport resolution measurescarried
out by thehome resolution authorityor, in exceptional cases, to take
measureson itsowninitiativetoprotect domesticfinancial stability.
National legal frameworksfor cross-bordercooperation in resolution
are, overall, lesswell-developedacrossall sectorsthan other areasof the
KAs(seeTable6 inAnnex D).
In most FSB jurisdictions,there are few or norelevant statutoryprovisions
for coordinationand cooperation for the effectiveresolutionof cross-
border firms.
Thelegal frameworkof most jurisdictionsneither requires nor prohibits
cooperation withforeign resolution authorities.
Eight jurisdictionshavestatutoryprovisionsthat explicitlyempoweror
stronglyencourageresolution authoritiesto cooperatewith foreign
authorities, whileseveralothersindicatethat it istheir policytocooperate
wherepossible.
No jurisdictionhascomprehensiveobligationsfordomesticauthoritiesto
avoid takingresolutionactionsthat may have an adverseeffect onthe
financial stabilityof other jurisdictions.

P a g e | 57
Authoritiesin EU member statesare required to considerthe impact of
their actionson financial stabilityin other EU states.
No jurisdictionsreport that their legal framework containslegislative
triggersthat require automatic actionsin relationtoa firm for whichthey
are a host jurisdictionwhenthehome jurisdictioninitiatesresolution or
insolvencyproceedingsor undertakesanyother official intervention in
respect of that firm.
While the legal frameworksin the majorityof FSB jurisdictionsdonot
providefor differential treatment of creditors(includingdepositorsand
policyholders) by location of their claim or the jurisdiction in whichthe
claim is payable, there is provision for differential treatment of certain
claims – in most cases,deposits– under the insolvencyor resolution
regimeof eight jurisdictions.
About a third of FSB jurisdictionshave mechanisms for giving legal effect
to decisions by foreign authorities, but the majority of those are based on
application tothe court.
While court-based processesare not precluded by the KAs, theyare
generallylesswell-adaptedto meetingthe objectivesof KA7 than
administrativeproceduresin that theymay be more time-consumingand
theoutcome lesspredictable.
Very few jurisdictionshave provisionsfor administrativerecognitionand
enforcement by the resolution authorityof resolutionactionstaken by
foreign authorities.
In only one of thosejurisdictionsdoesthenational resolution authority
havethe powerto recognisethetransferby thehome country resolution
authorityof local assetsand liabilitiesof a foreign bank, and make that
transfer effectiveunder locallaw.
Most jurisdictionsreport that theyhave some powersover branchesof
foreign banks.

P a g e | 58
However, in most cases, those powersstem from the domestic insolvency
framework or are much less comprehensive than the powers available for
locallyincorporatedbanks.
Domestic authoritiesmay be able tousethosepowersto support
resolution actionstaken by the home authority, but the legal framework
generallydoesnot make that explicit or set anyconditionstotheexercise
of such powersindependentlyof home state action.
8. Resolvability assessments (KA10)
KA10 requires jurisdictionsto undertakeregular resolvability
assessments,at least for G-SIFIs.
Theresolvabilityassessmentsshould beconducted in accordancewith
theguidanceset out in Annex II tothe KAs, and in coordination with
other authoritiesresponsiblefor the firm in question.
Supervisoryor resolutionauthoritiesshould havepowersto require firms
toadopt appropriate measureswherenecessaryto improve their
resolvability.
Onlyone jurisdictionhasin placea formal statutoryrequirement for
resolvabilityassessmentstobe carried out (see Table3).
Home jurisdictionsof G-SIFIs report that, in theabsenceof formal
requirements,supervisorscan usegeneral supervisory powersand
processesto carry out such assessments.
Few host jurisdictionsof G-SIFIs report that theyundertake resolvability
assessmentsat thisstage,althoughsomeindicatetheir intentiontodoso.
A few other jurisdictions also report that they are planning to undertake
resolvability assessments as a core part of domestic resolution planning
work.

P a g e | 59
Where resolvability assessments are being carried out or planned, the
focus is generally on global or domestic systemically important banks
(G-SIBs and D-SIBs respectively) rather than on a wider rangeof FIs.
Onlytwojurisdictionscurrentlyrequire resolvabilityassessmentsfor
institutionsfrom other financial sectors.
Given the lack of a formal statutoryframework or rules,few jurisdictions
haveestablishedguidanceabout howresolvabilityassessmentsshouldbe
conducted or the consequencesif firmsare not assessed asresolvable.
In most FSB jurisdictions,supervisoryauthoritieshave some powersto
asksupervised institutionstomakechangestotheir business
organisationand legal structure, but thepurposesfor and circumstances
under whichauthorities can exercise such powersvary across
jurisdictionsand financial sectors.
Afew jurisdictionsreport that their supervisoryauthority hasa broad
range of powersto take necessary measurestoensure financial
stability, and that theexerciseof thosepowersis not restrictedtospecific
circumstancesbased on distressof the institutionin question.
However,it is not clearwhethertheauthority can actuallyrequire
changessolelytoimprove resolvabilityof a firm, asspecifiedin theKAs.
In other jurisdictions,thepowersto require certain actionscan onlybe
exercised, or may more readily be used, after a firm fails tomeet specific
regulatoryrequirements,comesclosetomeetingthe conditionsfor
resolution, isfacinginsolvency, or is alreadyin resolution.
Given the intrusivenature of requirementstotakemeasuresto improve
resolvabilityand thefact that, where necessary, theyshould take effect in
advanceofanydeteriorationinafirm‘scondition, aclearpowertorequire
changesexplicitlyfor the purposesof improving resolvability isnecessary.

P a g e | 60

P a g e | 61
9. Recovery and resolution planning (KA11)
KA11requiresjurisdictionstoput in placea processfor on-goingrecovery
and resolution planningfor domesticallyincorporatedfirmsthat could be
systemicallysignificant or critical in theevent of failure.
RRPsshould contain the essential elementsset out in Annex III to the
KAs, and home resolution authoritiesof G-SIFIs should coordinatewith
thefirm‘s CMG toproducea group resolutionplan.
Although few jurisdictionshave formal statutory requirementsfor RRPs,
manyaredeveloping suchplansfor G-SIBsand D-SIBs.
Currently, jurisdictionsthat are home authoritiesof G-SIBshavestarted
workingon the development of RRPsthrough supervisorypolicy, and
manyjurisdictionshaverequired firmsto prepare recovery plansunder
existingsupervisorypowers.
Recovery and resolution planningin FSB jurisdictions– whether
undertaken currentlyor under development – is predominantlyfocused
on banks.
Only two jurisdictions have a framework for RRPs for other categories of
financial institution, while another jurisdiction is developing RRPs under
general supervisorypowers.
Many jurisdictionsreport that theyhavelegal frameworksin placefor
authoritiestoapprove firms‘recovery plans,and some emphasised that
authoritieshavethepowertorequirechangestosubmittedrecoveryplans
if they are not satisfiedwiththem.
For jurisdictionswherethere is no formal requirement for RRPs, the
sourceof powersto require changesis not clear, although some
jurisdictionsstated that their general supervisory framework providesthe
necessarypowers.

P a g e | 62
10.Accessto information and information sharing (KA12)
KA12 requires jurisdictionsto ensure that nolegal, regulatory or policy
impedimentshinder thedisclosureof firm-specificinformationto
domesticand foreign authoritiesfor thepurposesof planningand
carrying out resolution, irrespectiveof whetherthoseauthoritieshave
supervisoryfunctions.
Domestic authoritieswithresolutionfunctionsaregenerallyabletoshare
non-publicinformation witheach other.
Thisgeneral principleis subjecttoa few exceptions,wherethesharing of
confidential information withnon-supervisory domesticauthoritiesfor
both planningand carrying out resolution is either not permitted; limited
tospecificcircumstances,such asthe entry of a firm intoresolutionor
conditional on a decision to undertake a resolutioninvolvingpublic funds.
Where powerstodiscloseinformation are limitedor conditional in that
way, this may prevent authorities from sharinginformation for the
purposesof resolution planningand assessingresolvability.
Cross-border information sharing is considerablymore restricted. Eight
FSB jurisdictionsallowdomestic authoritiestoshare non-public
information with foreign resolution authoritiesthat are not supervisors.
In many cases,informationcan be shared cross-border between
supervisoryauthoritiesusingexistingsupervisorygateways, but not as
readilythrough other channels.
Supervisorygatewaysare not, however,sufficientlybroad toallow
confidential informationtobesharedwithall foreignauthoritiesthathave
a responsibilityfor planningor carrying out resolution of thefirm in
question.
In most cases,jurisdictionsdonot require a memorandum of
understanding(MoU) asa condition for disclosure of information under

P a g e | 63
existinggateways,but a number of jurisdictionsindicatedthat a MoU
wasin practice a prerequisiteor seen asdesirable.
IV. Planned reforms to resolution regimes
Somejurisdictionshavealreadyundertakenmajor legislativereforms
sincethe financial crisistodevelop new or reviseexistingresolution
regimes(seesection II andAnnex A).
Severalother FSBjurisdictionshaveeithersubmittedformal reform plans
tothe national legislatureor for public consultation, or have reforms
under development (seeAnnex C).
This is necessitatedby thefact that in most casesthe relevant legislation
pre-datestheKAs. The reformsaim at a range of objectives,including:
(i)Strengtheningthepowersavailable for the resolution of financial
institutions;
(ii) Expandingresolutionregimestonon-bank financial sectors;and
(iii) Aligning resolution regimeswiththeKAs.
Many of thesejurisdictionsarebasingtheir draft legislation on selected
elementsof the KAs.
Jurisdictionsare at varying stagesof thereform process.
Ninejurisdictionshaverecentlyenactedrelevant legislationand are
preparingimplementingrulesand regulations.
In most cases,thesereformsapplyto the banking sector and donot
establishor extend resolution powersfor non-banks.
Eight jurisdictionsand theEuropean Commission (for the EU) have
issueddocumentsfor publicconsultationor arepreparing draft
legislationto further strengthentheir resolution regimes,includingby

P a g e | 64
extendingthe regimeto insurers,securities or investment firms and/ or
FMIs.
In addition, ninejurisdictionsare consideringa variety of additional
reforms totheir resolution regimes.
Several other jurisdictionsreport that theyare planning to introduce
reforms requiring recovery and resolution plansfor financial institutions
that could have a systemic impact.
The proposed EU Directive on recovery and resolution, once approved,
will represent a major step forward in aligning the resolution regimes of
EU member stateswiththe KAs.
Thenew Directivewill apply to banksand investment firms, and to
holdingcompaniesof those firms.
TheDirectiveintroducescore resolution objectivesand a set of common
resolutionpowersfor all EU members, includingthetransfer of assets
and liabilities, establishment of a bridgebank, and powersto write down
liabilitiesand toconvert them toequity.
It alsorequires resolution authoritiestohave the power toimposea
temporarystay on theexercise of earlytermination rightsunder financial
contractswhena firm entersintoresolution.
TheDirectivewill alsorequireresolvabilityassessmentsandrecoveryand
resolutionplansfor banksand investment firms.
V. Conclusions and recommendations
1. Conclusions
Thefinancial crisishighlightedtheneedtosignificantlyenhanceexisting
resolution regimesin FSB jurisdictions.
While major legislativereformshave alreadybeen undertaken by someof
thosejurisdictions(particularlythosedirectlyimpacted by thefinancial

Risk management presentation June 17 2013

Risk management presentation June 17 2013

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