Article
Tackling too-big-to-fail
The resolvability challenge for banks
Making banks resolvable is a key part of the global response to tackle institutions deemed ‘too-big-to-fail’. As banks and resolution authorities turn in earnest to tackling impediments to resolvability, however, the complexity and magnitude of the challenge are becoming apparent.
While regulators in the U.S. and Europe are undoubtedly more advanced in their approach to resolvability than Asian regulators, the focus on issues relating to systemically important banks is becoming increasingly relevant in the region. As a result, we expect the regulatory framework across Asia to gradually converge towards the direction taken in these more mature markets
The paper sets out our view on what “good” looks like for banks trying to achieve resolvability, identifying six ‘resolvability drivers’ that they must address to meet resolution authorities’ expectations:
- Simplifying legal entity structures
- Reducing operational complexity
- Enhancing the credibility of loss-absorbing capacity
- Improving liquidity management
- Rationalising and justifying global booking models
- Enhancing data quality, reporting and valuation capabilities
For banks in Asia Pacific, the paper provides a strong framework for assessing business implications and explains how resolvability work can be leveraged as an opportunity to strategically transform businesses to become more efficient and competitive.
(English version)
The Resolvability Drivers
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