FSB to assess public backstop funding for bank resolution
The Financial Stability Board (FSB) has launched a thematic peer review to evaluate members' implementation of public sector backstop funding mechanisms for banks in resolution. The review will assess adherence to FSB policies and identify good practices.
Assessing last-resort funding for systemic banks
The Financial Stability Board (FSB) has initiated a thematic peer review to assess member jurisdictions' progress in establishing public sector backstop funding mechanisms.
These mechanisms are designed to provide temporary, last-resort funding to banks undergoing resolution, aligning with FSB Key Attribute 6 and the Guiding Principles on temporary funding for global systemically important banks (G-SIBs).
The review aims to evaluate implementation progress and planned actions by FSB members, ensuring these backstops are adequately designed and operationally ready to facilitate orderly bank resolution.
A key focus is on minimizing moral hazard risks and mitigating potential taxpayer losses, particularly for G-SIBs and other systemically important institutions.
The review will also identify effective practices and common challenges encountered during implementation, potentially leading to recommendations for FSB members and relevant international bodies.
Targeted scope, broad outreach
The peer review focuses specifically on public funding in resolution, conditions to minimise moral hazard, and provisions for loss recovery.
It will primarily examine global systemically important banks (G-SIBs), and other systemic banks where applicable.
Aspects such as banks' private resources or the feasibility of resolution plans are excluded, as these are covered by separate FSB work.
Information will be gathered through questionnaires submitted by FSB member jurisdictions.
This will be supplemented by stakeholder outreach, potentially including roundtables with public and private sector participants.
The final report, expected in October 2026, will detail implementation progress, common challenges, and effective practices, and may include recommendations.
Strengthening the last line of defense
This review is crucial for reinforcing the credibility of bank resolution frameworks, particularly for systemic institutions.
By scrutinizing public backstop funding, the FSB aims to ensure financial stability without taxpayer bailouts.
The findings will be vital for identifying gaps and driving necessary reforms to strengthen the global financial safety net.