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International Resolution Strategy

December 10, 2012
Overview

I. Update of heat map findings on key 

jurisdictions since last SRAC, and 

expansion of criteria beyond that of “total 

activity.” 

II. Outreach based on key jurisdictional 

findings. 

III. Key obstacles to cross-border resolution. 

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I. Recap Since Last SRAC

 OCFI Mission: 

To promote public confidence and 

maintain financial stability during 

periods of financial stress and crisis by 

effectively coordinating the cross-border 

resolution of G-SIFIs.
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Work Program

In furtherance of this objective, ICG has developed a 

work program to:

i. Understand each SIFI’s global footprint to enable the 

FDIC to mitigate the systemic impact of a SIFI failure 

by sustaining critical operations and core functions at 

viable foreign entities. 

ii. Identify key jurisdictions and work together with 

supervisors and resolution authorities.

iii. Identify and address obstacles to cross-border 

resolution.
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Key Findings 

from 2012 Work Program

 ICG’s 2012 work program confirms initial “heat map” findings 

presented to SRAC last January, adds new criteria (including 

additional SIFIs), and provides a basis for a methodology for 

ongoing bilateral initiatives:

 Factors Used to Determine Key Jurisdictions: 

 “Total Activities”

 Locations with Surplus Liquidity

 Operations Centers

 Key Memberships in Financial Market Utilities (FMUs) 

 Bilateral Engagement: 

 Crisis Management Groups (CMGs)

 Bilateral Discussions

 Proposed MOUs
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“Foreign Activity” Remains Concentrated 

in 3 Jurisdictions

 Key findings from analysis of the top 7 U.S. SIFIs 

(updated from top 5 analyzed in January) remain 

materially unchanged:

 Over 90% of the “total reported foreign activity” for all 7 

SIFIs is located in 3 foreign jurisdictions – with the UK 

still the largest footprint. 

 15 jurisdictions cover over 97% of “total reported 

foreign activity” of the top 7 U.S. SIFIs.

 1 to 7 legal entities account for over 85% of each 

SIFI’s “total reported foreign activity.” 
Identifying Key Jurisdictions –

Liquidity Surpluses

 Liquidity surpluses are also concentrated in a few 

jurisdictions. 

 Analysis of liquidity – location of substantial cash 

positions, intercompany funding and 

interconnections – suggest which entities might be 

integral to funding within the enterprise. 

 Excess third-party assets covering third-party 

liabilities heighten susceptibility to ring-fencing. 

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Identifying Key Jurisdictions –

Data and Operational Centers

 Overseas affiliates of SIFIs provide shared services, 

support critical operations, and underpin core business 

lines. 

 Available information shows clusters of data and 

operations centers around European financial centers 

(notably UK) and in Asia (notably India). 

 Analysis thus far reinforces earlier findings: a handful of 

jurisdictions remain our top priorities. 

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Identifying Key Jurisdictions –

Key Non-U.S. FMU Memberships

 Non-U.S. FMUs important to the material legal entities 

of the top 7 U.S. SIFIs notably include: 

 UK: London Clearinghouse (LCH); Continuous Link Settlement 

(CLS). 

 Belgium: Euroclear; SWIFT. 

 ECB/Eurozone member central banks: TARGET2. 

 Luxembourg: Clearstream. 

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Identifying Key Jurisdictions –

Multiple Factors Confirm Initial Findings

 Foreign Activity: Activity concentrated in 3 foreign 

jurisdictions (UK largest footprint). 

 Liquidity Surpluses: Liquidity similarly concentrated. 

 Data and Operational Centers: Key support services 

concentrated around key financial centers in Europe 

and in Asia. 

 Financial Market Utilities: Non-U.S. FMU 

memberships – key to continuing foreign operations –

concentrated in a few jurisdictions. 

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II. Engagement with 

Foreign Resolution Authorities

 Crisis Management Groups (CMGs): 

Continuing 

 Bilateral Dialogues: Established and 

ongoing 

 Bilateral MOUs: Underway 

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Crisis Management Groups (CMGs)

 23 CMG meetings in 2012, in 8 jurisdictions:

 EMEA: UK (5); France (5); Germany (1); Switzerland (1) 

 Asia: Japan (2); Hong Kong (2) 

 Americas: United States (4); Canada (3) 

 Opportunity for:

 In-depth dialogue between home and host jurisdictions 

 Cultivating and maintaining discussions on a variety of issues 

with many foreign regulators 

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Bilateral 

Cross Border Resolution MOUs

 Bilateral resolution MOUs with resolution and other 

financial services regulatory authorities in twenty-six

jurisdictions worldwide are contemplated: 

 Completed:

 UK (BoE, FSA); Ireland (CBI); Jersey (FSC); China (CBRC)

 Underway: 

EMEA: 6 jurisdictions 

Asia: 8 jurisdictions 

Americas: 5 jurisdictions 

 Planned: 7 jurisdictions
Key Features of Resolution MOUs

 Common Principles: 

 Recognize importance of ex ante preparation for effective implementation of 

firm monitoring, crisis management, and resolution strategies.

 Need flexible/adaptable cross-border crisis management arrangements.

 Coordinate with national and international authorities. 

 Mechanisms for and Scope of Regulatory Cooperation: 

 Consult regularly on resolution developments, analysis of firm-specific 

resolution issues/strategies, and planning contingencies for resolution 

scenarios/simulations. 

 Share relevant information (e.g., resolution plans/strategies, firm-specific 

information on financial and operational conditions, and regulatory changes). 

 Confidentiality and Data Protection: 

 Limit use of shared information to resolution planning and implementation.

 Require consent of supplying authority for onward sharing of information. 

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III. Key Obstacles 

to Cross Border Resolution

Goal: To continue critical foreign operations

 Ring-fencing

 Change of control requirements 

 Fit and proper requirements

 Termination of contracts (especially derivative contracts) 

 Access to payments, clearing and settlement systems 

 Access to collateral 

 Access to data/operational services (provided by affiliates) 
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In Conclusion: 

Successful Cross-Border Resolution

 Keys to a successful cross-border, orderly 

liquidation of a globally active institution include:

 Manage the workload by prioritizing.

 Plan ahead – promote understanding of our strategies 

and discussion through bilateral dialogue. 

 Address primary obstacles to resolution. 

 Promote the adoption of common toolkits for 

resolution and shared goals.