FSB Peer Review Finds Gaps in Global Bank Resolution Funding
What happened
The Financial Stability Board conducted a peer review finding major gaps in countries' ability to provide liquidity during a financial crisis, urging authorities to strengthen emergency funding arrangements for failing banks. The review determined that only Hong Kong, Japan, the United States, and the United Kingdom were fully compliant with the FSB's standards for bank resolution. The EU banking union and Switzerland were among several jurisdictions deemed to be materially non-compliant.
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Why it matters
The findings highlight systemic weaknesses in how global financial institutions are prepared for acute liquidity stress, a vulnerability demonstrated during the 2023 banking turmoil. The FSB recommended that authorities establish clear legal bases and identify temporary public funding options to support banks during failure.
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Who's involved
- Financial Stability BoardGlobal body monitoring risks to the financial system and conducting the peer review.
- SwitzerlandJurisdiction found to be materially non-compliant regarding bank resolution funding.
Who could feel it
Possible knock-on effectsThese are possibilities Brind reasoned out, not predictions, and not advice. Most are not stated in any report.
- SwitzerlandSpeculative
Swiss authorities might be required to increase the costs of bank funding arrangements to address material non-compliance.
- Bank of EnglandSpeculative
The Bank of England might face increased costs associated with implementing stronger liquidity rules for UK banks.
- SpainSpeculative
Spanish banks might face increased capital requirements to strengthen liquidity and funding arrangements.
- Santander GroupSpeculative
Santander Group might need to increase its capital reserves to meet heightened systemic risk scrutiny.
Keep exploring
The entities involved
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Financial Stability Board
organization
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Bank of Spain
central bank
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