The Financial Stability Board (FSB) warned that four out of five major countries are unprepared for a major bank failure, urging urgent action to establish government-backed liquidity facilities. India and Argentina were identified as completely non-compliant, lacking any emergency funding mechanisms for troubled lenders. The FSB's review of public sector backstops found that only the US, UK, Japan and Hong Kong fully met its recommendations among 19 jurisdictions. Several others, including Australia, Brazil, China, the EU, Indonesia, Saudi Arabia, Switzerland and Turkey, were deemed "materially non-compliant".
Canada, Mexico, South Africa, South Korea and Singapore were judged largely compliant. The watchdog emphasized credibility issues, noting fewer than half of jurisdictions have mechanisms capable of providing timely liquidity at the required scale. The 2023 Credit Suisse rescue highlighted the importance of emergency funding, with Switzerland's central bank providing SFr168bn in liquidity facilities.
However, the FSB cautioned that even with legal tools to impose losses on shareholders, temporary public funding may be essential for executing resolution strategies.
Source: Financial Times Companies · Summarized by HeadlinesBriefing