International Coordination

December 11, 2013

 

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Background

 Bilateral Outreach: The FDIC is engaged directly with key 

jurisdictions which either host significant US SIFI operations or 

which serve as home jurisdictions to foreign SIFIs with significant 

US operations.

 This work has included the FDIC – EC Joint Working Group, a 

forum created to exchange views with officials from both authorities 

on matters related to resolution and deposit insurance.

 Multilateral dialogue: Includes work under the auspices of 

international member organizations such as the Financial Stability 

Board (FSB) and the Basel Committee on Banking Supervision to 

help identify and address obstacles to the successful execution of 

cross border SIFI resolution.

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Bilateral Discussions: Europe

 UK: Following up on the joint paper of last December, we 

conducted a staff-level cross-border resolution tabletop exercise 

and plan to organize a principal-level exercise next year. 

 Switzerland and Germany: Significant principal- and staff-level 

engagements with the Swiss Financial Market Supervisory 

Authority (FINMA), in the case of Switzerland, and the German 

Federal Financial Supervisory Authority (BaFin), in the case of 

Germany. 

 Japan: Principal-level delegation to visit Japanese authorities to 

engage on resolution-related matters, including the conclusion of an 

exchange of letters for the purpose of information sharing. The 

FDIC also recently concluded a resolution related MOU with the 

People’s Bank of China.

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ISDA Letter

 The disorderly termination of derivatives contracts arising out of the 

exercise of counterparty termination rights following the 

commencement of an insolvency or resolution action remains a 

significant barrier to cross-border resolution.

 This problem has been identified by the FSB, academics, financial 

institutions, and regulatory and resolution authorities, and a solution 

will require work both at the regulator and industry level.

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ISDA Letter (cont.)

 The FDIC worked together with the Bank of England, BaFin and 

FINMA to develop a joint letter to ISDA recommending that it 

amend its standard documentation to provide for a short-term 

suspension of early termination rights and other remedies on the 

basis of the commencement of an insolvency or resolution 

proceeding or exercise of a resolution power with respect to a 

counterparty or its specified entity, guarantor or credit support 

provider.

 This represents significant cooperation with our fellow regulatory 

authorities in Europe, and is a direct result of the FDIC’s 

commitment—at the highest levels—to its bilateral and multilateral 

cross-border entagement. 

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FDIC - EC Joint Working Group

 The FDIC and the European Commission have established a joint 

working group made up of senior executives from our respective 

organizations to focus on both resolution and deposit insurance 

issues. 

 The working group meets twice a year, once in Brussels and once 

in Washington, with regular opportunities for dialogue in between.

 There have been two meetings held this year, the most recent in 

Brussels in September. 

 We have had detailed discussions on the FDIC’s experience with 

resolution and deposit insurance as well as our SIFI resolution 

strategy, and on the pending EU Recovery and Resolution Directive 

and proposal for a European Resolution Mechanism, which we will 

discuss in the following slides.

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EU Developments

 The EU is developing a comprehensive package of 

financial reforms in response to the recent financial 

crisis.

 These initiatives include:

 An EU Recovery and Resolution Directive (“RRD”);

 A Single Supervisory Mechanism (“SSM”); and

 A Single Resolution Mechanism (“SRM”).

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EU Developments (cont.)

 The RRD, in its current draft form, would establish a framework to be 

implemented by EU member states through national legislation to 

facilitate the resolution of member state financial institutions while 

ensuring continuity of essential services, minimizing the impact of 

failure on the European financial system and avoiding costs to 

taxpayers.

 The SRM, in its current draft form, covers all Euro area member states 

and those non-Euro area member states who choose to join, and 

would work in conjunction with the RRD to provide a unified system for 

resolution of banking institutions within the EEA.

 The SSM, passed in October 2013, will create a new system of 

financial supervision comprising the European Central Bank and the 

national authorities of all Euro area member states and those non-Euro 

area member states who choose to join.

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EU Developments

Impact to the FDIC

 The RRD, the SSM and the SRM include many 

powers similar to those available to US 

authorities, including the orderly liquidation 

authority under Title II of the Dodd-Frank Act.

 Once these new laws and regulations are 

implemented, the similarities between our 

respective regimes should provide the basis for 

increased coordination between the US and the 

member states of the EU in the event of a 

failure of global systemically important financial 

institution.

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 The FSB is the first major international governance innovation of the 

G-20 leaders and their primary response to the 2007-2009 global 

financial crisis.

 Membership:

 52 financial authorities from 24 member jurisdictions, including all of the G-20 

nations

 International organizations

 International standard-setting bodies

 US Representation: 

 FDIC and other US authorities participate as leaders/members of FSB groups and 

workstreams

 The FDIC addresses resolution related matters through the work of the Resolution 

Steering Group

FSB – Overview
Key Attributes of Effective Resolution Regimes

In October 2011, the FSB published the Key Attributes of Effective Resolution 

Regimes for Financial Institutions, which was endorsed by the G20 the 

following month at the Cannes summit: 

 The Key Attributes is an internationally-agreed standard that sets forth the 

responsibilities and powers that national resolution regimes should have to 

resolve a failing systemically important financial institution (SIFI). 

 Influenced by and consistent with the FDI Act and Dodd-Frank Act, it 

requires member jurisdictions to:

 Have in place resolution regimes with a broad range of powers to intervene and 

resolve a financial institution that is no longer viable;

 Remove impediments to cross-border cooperation and provide resolution 

authorities with incentives, statutory mandates and powers to share information 

across borders;

 Ensure that recovery and resolution plans are put in place for all G-SIFIs;

 Maintain Crisis Management Groups for all G-SIFIs, bringing together home and 

key host authorities underpinned by institution-specific cross-border cooperation 

agreements.

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ReSG 2014 Workplan

 The Resolution Steering Group has proposed an ambitious agenda for 

the coming year

 G-SIIs: CMGs to be established by July 2014 and RRPs to be 

developed by year-end 2014

 GLAC: six new workstreams, including the nature of GLAC, minimum 

GLAC amounts, intra-group GLAC and associated triggers, 

enforceability of bail-in, regulatory limits on GLAC holdings, and 

disclosure of GLAC

 Termination of QFCs: development of options to prevent triggering of 

early termination rights due to entry into resolution by year-end 2014

 Cross-border recognition: develop recommendations on tools to 

facilitate recognition of foreign resolution measures by year-end 2014

 Funding and Liquidity: develop guidance on sources of resolution 

funding by year-end 2014