IIF Authors

Status: Will be live at 12/01/2014 00:00

IIF-GFMA comment letter to the two FSB consultative documents on cross-border recognition and on cooperation and information-sharing

Monday, December 1, 2014

On December 1, the IIF and GFMA jointly submitted a letter to the FSB on the two consultative documents on Cross-border Recognition of Resolution Action , and on Guidance on Cooperation and Information Sharing with Host Authorities of Jurisdictions not Represented on CMGs where a G-SIFI has a Systemic Presence.


Cross-border Recognition of Resolution Action

The first consultative document proposes a package of policy measures and guidance in order to enhance legal certainty in cross-border resolution. It' includes a set of elements that jurisdictions should consider in their statutory cross-border recognition frameworks, and guidance of contractual approaches to cross-border recognition regarding stays on early termination rights in financial contracts and bail-in clauses' in debt instruments under foreign laws.

The associations are supportive of the consultative documents, considering that'  contractual arrangements can provide workable interim solutions to assure affective and orderly cross-border resolution.'  The industry is committed to the rapid implementation of contractual solutions with regard to temporary stays and bail-in, as expected in the consultative document.'  While the associations are supportive of using all appropriate means to obtain the goals of consistent cross-border outcomes in resolution, there is a strong preference for cross-border recognition of relevant proceedings in order to obtain consistent results across a firm in resolution, rather than relying on domestic supportive measures (as defined in the document)' that may result in technical differences or procedural divergences that would get in the way of a single, consistent outcome for all claimants on a failing cross-border firm.'  There is a general preference for' statutory solutions where possible, but acceptance of the constructive role of contractual solutions.

Additionally in the comment letter, the associations urge the FSB to adopt a concerted program focused on wide and early adoption of further regulatory - and statutory measures where needed - and to take a stronger stand on promoting the provisions that are necessary.'  The letter also suggests the FSB give more stress to the role of Cross-Border Cooperation Agreements and Crisis Management Groups (CMGs) in the consultative document.'  CMGs could use COAGs to facilitate meeting the goals of cooperation set out in the Key Attributes and the consultation document.


Cooperation and Information Sharing with Host Authorities of Jurisdictions not Represented on CMGs where a G-SIFI has a Systemic Presence

The second consultative document proposes guidance on (i) identification of jurisdictions that are host to a G-SIFI which has a systemic presence domestically in their jurisdictions but are not represented on the FSB's CMG, (ii) arrangements of cooperation and information sharing between such jurisdiction and CMG member jurisdictions that are by nature limited to key authorities of home or host to the material entities of a G-SIFI group, and (iii) types of information to be shared between the two groups of jurisdictions.

The associations consider the consultative document helpful generally and welcome the initiative of the FSB to assure appropriate inclusion of non-CMG authorities.

The associations support the proposal to use BCBS D-SIB principles to identify such jurisdictions, with some reservations regarding how the proposed principles relate to "resolution entities" and "material entities" under the other FSB's proposals on TLAC.'  Additionally, the associations pointed out that a higher expectation should be set for host country compliance with the group plan as to "material entities" (assuming "resolution entities" would be included in any group plan).

More importantly, while confidentiality is incorporated in the consultation document,'  information should be shared with the relevant jurisdictions only when and insofar as necessary and appropriate.'  In particular, the details of recovery and resolution plans are highly sensitive and should not be shared in full, except where necessary and appropriate.'  A firm must be able to refuse to provide information if doing so would violate otherwise-applicable laws or regulations of its home or other host jurisdictions. Also, a firm must have the right to contest any requirement to provide information if its confidentiality may not be adequately protected under local law of the transferee jurisdiction.