Systemic Support for Banks

Highlights

• 29 Apr 2013
  • Growing recourse to burden-sharing in EU bank resolutions points to reduced likelihood of systemic support
    The steady policy progression towards resolving banks by governmental burden-sharing with creditors is likely to continue, as declining political tolerance amid stabilizing markets means a greater willingness to permit creditor losses. The recent imposition of losses (bail-in) on all classes of unsecured bank creditors in Cyprus was another step toward broader burden-sharing, and has contributed to an acceleration of efforts to achieve a banking union, as well as a bank resolution framework in the EU in advance of the original 2018 target date… Press Release l Full Report
• 27 Mar 2013
  • Systemic support in US bank holding company ratings remains under pressure
    Our update and FAQ on the Orderly Liquidation Authority (OLA) under Dodd-Frank discusses four main challenges facing US regulators in resolving troubled systemically important US financial institutions: 1) the need for cross-border regulatory coordination; 2) the capital structure of these banks; 3) the complexity of these firms' legal, funding, and operational structures; and 4) the high degree of interconnectedness among these firms. The FDIC has made considerable progress in identifying the hurdles to resolving complex, interconnected institutions, but significant challenges remain. We thus maintain systemic support uplift in our credit assessments of eight US banking groups… Press Release l Full Report
• 25 Mar 2013
  • Canada's Bail-In Plan for Systemically Important Banks Is Credit Negative
    In a move consistent with the global framework for domestic systemically important institutions that the G20 endorsed in November 2012, the Canadian government confirmed that systemically important Canadian banks will face a higher, but as-yet-undetermined, capital requirement. A bail-in regime would reduce the potential requirement for taxpayer-funded assistance, and the capital surcharge improves a bank’s standalone credit quality. However, an effective bail-in regime increases the government’s ability to impose losses on debtholders and a lower probability of systemic support could increase bank funding costs. Taken together, the plans are credit negative for Canadian banks... Full Report