Click for Goldman’s ‘living will ‘ for regulators, listing how it would try to resolve by selling parts of its business under bankruptcy:
On Friday, the Financial Stability Board published the provisional list of global systemically important financial institutions (G-Sifis).
This had been widely trailed but we’re still wrestling with a tricky question: Read more
Foreign banks with a small US presence are pushing for exemption from new “living will” requirements, the WSJ reports. The rules as they are currently proposed would apply to 98 financial institutions based outside the US, of which the Institute of International Bankers says 78 have US operations so small that a living will would be an “undue burden”. The push comes ahead of a meeting by the Federal Deposit Insurance Corp next week in which the regulator is expected to finalise proposed rules for living wills, however further input on the rules will come from the Federal Reserve, which is jointly writing the rules with the FDIC. US authorities also will have to coordinate their stance on living wills with regulators in other countries. Read more
All UK deposit-takers and large investment firms will have to draw up “living wills” by the end of next year that would allow them to be wound down over a weekend and quickly return assets to clients, the FT reports. Six big UK banks are already working on such recovery and resolution plans, part of a broad effort to avoid another banking crisis. But the Financial Services Authority said in a consultation paper on Tuesday the requirement would be extended to more than 250 banks and building societies, as well as investment firms with more than £15bn in assets. The two-part plans require financial groups to first detail the measures they would take in an extreme case to prevent a collapse – including cancelling bonuses and dividends, selling off divisions and raising capital. The plans must then outline a strategy for preserving key economic functions through a wind-up.
The Financial Stability Board on Monday night declared the capital surcharge requirements for global ‘SIFIs’, as drafted by the Basel Committee last month, shall go ahead. Ditto “living wills”.
The real fun will come later this week, when the methodology for determining who is a G-SIFI will be published, along with proposals for measures that can be taken to deal with failing SIFIs, such as the living will. Read more
Global regulators endorsed twin proposals on Monday to force the biggest banks to hold extra capital and write “living wills” that will enable them to be shut down safely in a crisis, the FT reports. The Financial Stability Board endorsed the capital surcharge plan, the Basel proposal to require about 30 global systemically significant financial institutions, known as G-Sifis, to hold additional equity against unexpected losses. The FSB also unveiled what its chairman, Mario Draghi, promised would be a “very major change in national and cross-border practice” towards deeply troubled global institutions. Regulators will be given a toolkit for breaking such banks into viable and nonviable parts. The proposals will be presented on to the leaders of the Group of 20 leading economies for approval in November. The FSB also also gave its support to ”bail-ins” to impose losses on bondholders were endorsed, and said its next report to the G20 would include recommendations on regulating the shadow banking sector. Read more
It’s arrived! Straight from the European Commission — the much-anticipated consultation paper on haircuts for (dum dum dum) investors in future bank debt.
The press release, with our highlights: Read more
The future of the British banking sector, might just be right here
On Friday we get the trailed publication of the UK Independent Commission on Banking’s so-called ‘Issues Paper’ and call for evidence. It’s 68 pages of rip-roaring industry stuff, but we’ve picked out the more interesting “reform options” for you below. Read more
Sheila Bair, chairman of the US Federal Deposit Insurance Corporation, has said some members of the Basel committee setting international capital standards are “succumbing” to “disingenuous” lobbying from large banks. In an interview with the FT, Ms Bair also said she would not hesitate to use newly acquired powers to break up an institution if it could not provide a credible “living will” describing how it could be wound up in the event of failure. Meanwhile, the Federal Reserve’s Daniel Tarullo told a US Senate committee on Tuesday that large banks need to hold bigger capital buffers, Reuters reports. Read more
Two important developments in FDIC world on Tuesday.
First, the failed-bank overlord formally proposed a new rule that would require the largest US banks to prepare ‘how-to’ guides for regulators who might need to dismantle them further down the line. Read more