The Financial Stability Board has published a statement summarizing the feedback it received to its June 2019 consultation on the solvent wind-down of derivatives and trading portfolios. The consultation sought feedback on a series of questions regarding existing wind-down practices that may be used as a recovery option for global systemically important institutions that find themselves under stress. The FSB intended to consider publishing guidance on solvent wind-down planning depending on the responses elicited by the consultation. On the basis of the responses received, the FSB has decided not to develop further guidance. Respondents’ views were that such planning should be consistent with national regulators’ resolution strategies and plans.
Key responses included:
- Agreement that any future guidance on solvent wind-down planning would need to limit regulatory divergence, acknowledge different business models and be principles-based and capabilities-focused;
- Confirmation of the “capabilities” approach proposed by the FSB in the consultation paper, with a qualification that not all capabilities identified in the discussion paper are specific to solvent wind-down planning;
- Confirmation of the descriptions of evaluation and verification mechanisms by national regulators and support for cooperation between home and host regulators; and
- Proposals for advancing successful solvent wind-down planning through dedicated workshops and simulations, with a caveat that any guidance on wind-down planning should apply only to large banks with significant trading books and should not apply to internal hedging.
Feedback on the FSB’s June 2019 consultation on the public disclosure of resolution planning and resolvability, which was alongside the FSB’s solvent wind-down consultation, was also published today. View the FSB's summary of feedback on its Solvent Wind-down consultation.