Financial Stability Board Statement on the Importance of Resolution Planning and Loss-Absorbing Capacity for Banks Systemic in Failure

The Financial Stability Board has published a statement on the importance of resolution planning and loss-absorbing capacity for banks systemic in failure. The FSB aims to clarify the importance of resolution preparedness for all banks, recognising that the principles outlined are already established for G-SIBs. The statement includes considerations to inform jurisdictions' regulatory and policy frameworks for the resolution preparedness of banks:

• authorities should assess which banks may be systemically significant or critical if they fail, including ensuring they have sufficient information to make this assessment in normal times and in a crisis. This includes banks that were not explicitly designated as systemically significant or critical prior to their failure.
• authorities and banks deemed systemic in failure should be prepared for resolution – banks systemic in failure should ensure they are resolvable in a way that protects their critical functions without severe systemic disruption.
• authorities should consider the need for loss-absorbing capacity. The FSB advises that some of the total loss-absorbing capacity principles applicable to G-SIBs are relevant also for other banks. The FSB sets out the TLAC principles that tend to be reflected in existing loss-absorbing capacity jurisdictional frameworks for non-G-SIB banks. The FSB also highlights the importance for considering the cross-border spillover effects of a bank systemic in failure.

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