Bank Recovery and Resolution
Bank Recovery and Resolution: overview
In the wake of the global financial crisis, work has been ongoing internationally to address the issue of banks being ‘too big to fail’ – i.e. to ensure that the cost burden of any future bank failure is for the account of its shareholders and creditors, and not for the taxpayers, who ultimately ‘bailed-out’ troubled banks during the crisis.
In 2011, the Financial Stability Board, which had been created by the G20 Governments in response to the financial crisis, published a set of “Key Attributes of Effective Resolution Regimes for Financial Institutions”. These have since informed the development of Bank Recovery and Resolution regulations which have been introduced in many jurisdictions around the world.
Approach to Bank Recovery and Resolution in the Isle of Man
The Isle of Man is currently considering how best to implement an appropriate Bank Recovery and Resolution regime. This work is being undertaken by the Treasury, in close collaboration with the Authority and will involve stakeholder input from locally licenced banks and their professional advisers during the policy development phase.
Ultimately it is expected that a Bank Recovery and Resolution Bill will be brought forward for consideration by Tynwald and which, once enacted, will provide the legal basis for any new Bank Recovery and Resolution framework that is introduced.
One learning from the financial crisis was the need for banks themselves to develop detailed plans as to how they would seek to recover from a stress event, or events, serious enough to threaten the viability of the bank. By considering these events in advance and documenting actions which bank management might take in response, the resilience of a bank to a potential ‘shock’ event may be improved. The Authority’s expectations of locally licenced banks in relation to recovery planning are currently being finalised and will be made available to banks shortly.
The Financial Stability Board’s ‘Key Attributes of Effective Resolution Regimes for Financial Institutions’ can be accessed here
Further relevant documents will be added to this section on an ongoing basis.