FSB event: Joint readiness for cross-sectoral crises

The FSB's ReSolve event aims to foster cross-sectoral dialogue among authorities responsible for banking, insurance, and central counterparties, acknowledging that financial crises do not respect traditional boundaries.

Past events, such as the 2008 global financial crisis and the failure of Lehman Brothers, demonstrated how stress quickly propagates across borders and markets.

The rescue of AIG highlighted systemic risks stemming from vulnerabilities in the insurance sector, specifically through massive exposures to credit default swaps that created acute liquidity pressures across major global banks.

This experience underscores that future crises may emerge through unexpected channels, making strengthened preparedness essential.

The speaker emphasized that today's increased interconnectedness means vulnerabilities can propagate in even more unforeseen ways, necessitating a shift from individual preparedness to "joint readiness" across countries and sectors.

This cross-sectoral understanding is crucial for dealing with complex crises that do not fit neatly within institutional or sectoral limits.

The event aims to tackle difficult questions regarding the cross-sectoral consequences of resolution.

Authorities must understand if a bank's resolution could stress an insurer or central counterparty, or vice versa, to ensure overall financial system resilience.

Identifying transmission channels and unintended consequences is critical to address preparedness gaps before the next crisis.

The speaker emphasized that while legal frameworks and policy standards are essential foundations, "readiness" is where these frameworks become operational.

Credibility is built before a crisis through resolvability assessments, strengthened operational capabilities, and cross-border exercises.

The FSB's international standards underpin modern resolution regimes, and their purpose is achieved through consistent and effective implementation.