FSB has drawn on the experience gained from the implementation of the “Key Attributes of Effective Resolution Regimes for Financial Institutions” to offer deeper examination of certain aspects and promote consistency in approaches to recovery and resolution planning (RRP) for SIFIs. The report discusses quantitative and qualitative recovery triggers, and also the issue of negative market reaction when recovery action is taken. It also provides a framework for identifying critical functions that need to be continued to avoid financial instability. On developing resolution strategies and operational resolution plans, FSB notes that CMGs’ approaches to resolution can be broadly categorised as either:
- single point of entry (SPE), where powers are applied at the parent company level by a single resolution authority. This approach requires that the parent company is able to downstream resources to its subsidiaries or to assume their losses; or
- multiple point of entry (MPE), where powers are applied by various resolution authorities to multiple parts of the group. This approach involves dividing the group without affecting critical functions.
The consultation also provides a detailed account of the aspects that need to be heeded in an operational resolution plan and the particularities that arise from adopting an SPE or an MPE approach.
FSB asks for comments by 7 December on a range of questions relating to:
- recovery triggers and stress scenarios;
- developing resolution strategies and operational resolution plans; and
- identification of critical functions and critical shared services.
(Source: RRP: Making the Key Attributes Requirements Operational)