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Home > News and Publications > Ending too big to fail: Getting the job done - speech by Andrew Gracie
 

Ending too big to fail: Getting the job done - speech by Andrew Gracie

26 May 2016

​Given at Deloitte, London


When G20 Leaders were putting together the post-crisis financial reform agenda in 2009 in London and Pittsburgh, the imperative to find a solution to too big to fail (TBTF) was clear.  Feelings were rightly raw given the scale of public support provided to banks and the damage to the global economy. But there was scepticism that resolution - managing the failure of systemically important financial institutions without taxpayer support and without crashing the financial system - would ever work.  Naysayers thought that bail-outs would always be necessary for larger banks, especially those operating cross-border. The work that has been done since has met this challenge. With the publication of the final Total Loss-absorbing Capacity (TLAC) Standard  in November last year a major milestone was passed. We have come a long way to making G-SIB resolution feasible and credible, and with implementation of the measures already agreed, and the tying of loose ends, the task will be complete. Today I want to review what we have done and what remains to be done to make G-SIBs resolvable.

But before turning to resolvability of firms let me say something first about the FSB Key Attributes (KAs) of Effective Resolution Regimes for Financial Institutions  and the process of resolution planning, both of which are driving the building out of the new resolution paradigm.

The KAs, which were agreed by the FSB and endorsed by G20 Leaders at their summit in Cannes 2011, are the foundation on which all else has been built:

a. The KAs set out our shared objective as authorities – to be able to manage the failure of a G-SIB without adverse impact on system stability, and without recourse to taxpayer funds.

b. They list the minimum elements needed for a statutory resolution regime to be effective.  As countries have implemented the KAs at national level, this has provided a convergent framework of resolution regimes internationally, smoothing the way for resolution to work consistently
cross-border.

c. Finally, the KAs instituted a process of resolution planning for global systemically important banks (G-SIBs) in crisis management groups (CMGs).  

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