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From Banking and Finance Law Daily, May 16, 2013

Regulators Say U.S. Taking Lead Role in Global SIFI Resolution Strategy

By Sarah Borchersen-Keto, Washington News Bureau

Regulators told a Senate panel that addressing the issues associated with the resolution of a global systemically important financial institution is challenging, particularly because many countries have not made as much progress as the United States on the matter.

Paved the way. “By acting early through the passage of the Dodd-Frank Act, Congress paved the way for the U.S. to be a leader in shaping the development of international policy for effective resolution regimes for systemic financial firms,” said Michael Gibson, Director of Banking Supervision and Regulation at the Federal Reserve. At a May 15, 2013, hearing of the Senate Subcommittee on National Security and International Trade and Finance, Gibson noted that in many ways the Orderly Liquidation Authority has become a “model resolution regime” for the international community.

Gibson remarked that while the Federal Deposit Insurance Corporation has made “good progress” in developing the framework for using OLA over the past three years, “most other major jurisdictions have not yet enacted national legislation that would create a statutory resolution regime” to meet Financial Stability Board requirements.

Early stages. William Murden, Director of the Treasury Department Office of International Banking and Securities Markets, told the hearing that outside the United States, implementation “remains at an early stage, and many jurisdictions still lack the necessary powers and institutions to resolve effectively either global-SIFIs or other financial institutions.” The United States has had 75 years of experience in resolving financial institutions, Murden said, “but many countries have only recently realized the need to implement an effective resolution regime.”

But although other jurisdictions lag behind the United States, progress is occurring, Murden said, pointing to efforts underway by major jurisdictions in Europe and Asia.

Complex and difficult issues. In his statement to the Subcommittee, James R. Wigand, Director of the FDIC’s Office of Complex Financial Institutions, noted that “the FDIC, working with our foreign colleagues, has made substantial progress in one of the most challenging areas of the financial reforms adopted in the Dodd-Frank Act. The cross-border issues presented by the failure of a G-SIFI with international operations are complex and difficult. The new authorities granted to the FDIC under Title I and Title II of the Dodd-Frank Act provide a statutory framework to address these important issues. While much work remains to be done, the FDIC is much better positioned today to address the failure of one of these institutions.”

MainStory: TopStory DoddFrankAct FinancialStability Receiverships

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