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From FSB Peer Review Finds Gaps in Global Bank Resolution Funding

How could the FSB peer review following 2023 banking turmoil affect the Bank of England?

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The Bank of England may face regulatory changes from FSB liquidity review The Financial Stability Board (FSB) conducted a peer review after the 2023 banking turmoil, finding major gaps in how countries manage bank liquidity during a crisis. While the United Kingdom was found to be fully compliant with the FSB's existing requirements, the review recommended that authorities strengthen emergency funding arrangements globally. Specifically, the FSB urged authorities to establish a clear legal basis for providing temporary public funding during a bank failure and ensure they have powers to recover any losses. As a key financial regulator, the Bank of England may need to review and potentially update its domestic regulatory framework to align with these strengthened global standards and recommendations.

Reported by 1 independent outlet Written Oct 15
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How it reaches Bank of England

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The facts so far

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  • The FSB found fewer than half of jurisdictions had funding arrangements that were clearly defined, large enough and capable of being deployed quickly.aol.com
  • Only Hong Kong, Japan, the US and UK were found to be fully compliant with the FSB's requirements.aol.com
  • The FSB recommended authorities identify in advance what temporary public funding could be made available during a bank failure.aol.com
  • The FSB recommended establishing a clear legal basis for providing support during a bank failure.aol.com

Why it matters

For the Bank of England, the findings underscore the continuous need for regulatory vigilance in a rapidly changing global financial landscape. While the UK was deemed compliant, the FSB's recommendations signal a global trend toward more robust and legally defined public sector backstops, which could necessitate operational changes or policy updates within the Bank of England's regulatory remit.

This review is part of a broader effort launched after the 2023 banking turmoil, which demonstrated how quickly lenders could come under acute liquidity stress. Other jurisdictions, such as the EU banking union and Switzerland, were deemed 'materially non-compliant,' highlighting that the pressure to strengthen resolution mechanisms is a widespread international concern.

What we don't know yet

  • Will the FSB issue specific, mandatory updates to its standards based on the review's findings?
  • How quickly will the Bank of England integrate the FSB's recommendations into its domestic regulatory policy?

What would change this answer

Further major bank failures occur globallyThe FSB may accelerate its timeline for new, stricter global standards, increasing the urgency and scope of regulatory changes required by the Bank of England.
The FSB issues a detailed implementation roadmap for its recommendationsThis would provide a clearer timeline and specific requirements, allowing the Bank of England to better plan its necessary regulatory adjustments.

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  • About Basel Committee

    Do the FSB's recommendations on emergency funding align with or challenge existing standards set by the Basel Committee?

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The full eventFSB Peer Review Finds Gaps in Global Bank Resolution Funding Everything aboutBank of England

Brind's analysis is written by AI from the reporting linked above and can be wrong. This explainer is a possibility worth considering, not a forecast: steps marked as Brind's reasoning are not stated in the reporting. It is not investment advice; do your own research.