BaFin release for global systemically important institutions
When global systemically important credit institutions fail – i.e. banks that are too big, too complex or too interconnected with other market participants to be able to exit the market following insolvency without creating further problems – it can put the stability of the financial markets at risk. That is why, during the financial market crisis, taxpayers’ money had to be used to support the banks.
Since then, supervisors and regulators have been working at the international level to find a solution to the problem posed by institutions that are “too big to fail”. Essentially, the goal is to ensure that such institutions can also be wound up in an emergency, without unsettling the market.
Several important steps forward were made in this regard in November. First, the Financial Stability Board published a proposal stating that global systemically important institutions should be obliged to have sufficient resources available for resolution, should it become necessary. In addition, the 18 largest global systemically important banks have committed themselves to recognising certain orders by foreign authorities for cross-border resolution and to temporarily waiving their termination rights for derivatives in the event of difficulties.
Read the full release here: Additional capital requirements for global systemically important institutions
Source: BaFin – BaFin release for global systemically important institutions
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