SIFI Resolutions and Living Wills: The Financial Stability Board Proposal (and some U.S. and UK observations)


On July 19, 2011, as part of a broad program to enhance the regulation of systemically important financial institutions (“SIFIs”), the Financial Stability Board (“FSB”) published a consultative document, “Effective Resolution of Systemically Important Financial Institutions” (the “FSB Paper”). The paper proposes several additions to and improvements in domestic and cross border resolution regimes, including the preparation of Recovery and Resolution Plans (“RRPs”). Comments are due by September 2, 2011.

The proposals in the FSB Paper are not unexpected, and many have been telegraphed over the past several months at least. The release of the paper and the FSB’s plan to make final recommendations to the G-20 in November will, however, cause the large majority of SIFIs to focus on these proposals.

In addition, nearly all SIFIs will need to assess the impact of the proposals in the FSB Paper in the light of other proposals in the United States, the European Union and the United Kingdom. Today we are publishing another client alert that discusses the UK Paper in detail. The proposals share the same underlying policies, but there are differences that present the possibility of divergence in resolution policy, particularly in early stage planning. Actual or potential differences that exist include such issues as the universe of SIFIs covered, the scope of resolution plans, the nature of a “resolvability” assessment, “bail-in” power, the treatment of branch offices or subsidiaries of SIFIs based elsewhere, and the treatment of custodial functions.

Please see full alert below for more information.

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