Annex

Legal Framework, Mandate,

Legal protection

BCBS Core Principles for Effective Banking Supervision

BCP1 Responsibilities, Objectives and Powers

An effective system of banking supervision has clear responsibilities and Objectives for each authority involved in the supervision of banks and banking groups. A suitable Legal Framework for banking supervision is in place to provide each responsible authority with the necessary legal Powers to authorize banks, conduct ongoing supervision, address compliance with laws and undertake timely corrective actions to address safety and soundness concerns.

BCP1EC1 The responsibilities and Objectives of each of the authorities involved in banking supervision are clearly defined in legislation and publicly disclosed. Where more than one authority is responsible for supervising the banking system, a credible and Publicly Available framework is in place to avoid regulatory and supervisory gaps.

BCP2 Independence, accountability, resourcing and Legal protection for supervisors

The supervisor possesses operational Independence, transparent processes, sound governance, budgetary processes that do not undermine Autonomy and adequate resources and is accountable for the discharge of its duties and use of its resources. The Legal Framework for banking supervision includes Legal protection for the supervisor.

BCP2 EC9Laws provide protection to the supervisor and its staff against lawsuits for actions taken or omissions made while discharging their duties in good faith. The supervisor and its staff are adequately protected against the costs of defending their actions or omissions made while discharging their duties in good faith.

IAIS Insurance Core Principles

ICP1 Objectives, Powers and Responsibilities of the Supervisor

Each authority responsible for insurance supervision, its Powers and the Objectives of insurance supervision are clearly defined.

ICP1.0.1. Publicly defined Objectives foster transparency. Based on this, government, legislatures and other stakeholders, including insurance industry participants and consumers, can form expectations about insurance supervision and assess how well the supervisor is achieving its Objectives and fulfilling its responsibilities.

ICP1.1. Primary legislation clearly defines the authority (or authorities) responsible for insurance supervision.

ICP1.2. Primary legislation clearly determines the Objectives of insurance supervision and these include at least to:

• protect policyholders

• promote the maintenance of a fair, safe and stable insurance market

• contribute to financial stability.

ICP1.3. Primary legislation gives the supervisor adequate Powers to meet its responsibilities and Objectives.

ICP2 Supervisor

The supervisor is operationally independent, accountable and transparent in the exercise of its responsibilities and Powers and has adequate resources to discharge its responsibilities.

ICP2.0.1. Operationally Independence, accountability and transparency by the supervisor contribute to the legitimacy and credibility of the supervisory process.

ICP2.0.4. Transparency reinforces accountability. Transparency increases the predictability of supervision and shapes the expectations of supervised entities, which enhances supervisory effectiveness. For these reasons, supervisory requirements, supervisory processes as well as information about the supervisor’s responsibilities should be publicly disclosed, in a manner consistent with any confidentiality requirements imposed on the supervisor.

ICP2.2. Legislation governing the supervisor provides the necessary Legal protection from legal action against the supervisor and its staff for actions taken in good faith while discharging their duties. In addition, the supervisor’s staff is adequately protected against the costs of defending their actions.

IOSCO Objectives and Principles of Securities Regulation

A. Principles Relating to the Regulator

P1 The responsibilities of the Regulator should be clear and objectively stated.

P1 (Methodology/Key issues): Responsibilities of the Regulator should be clear and objectively stated, preferably in law.

P3 The Regulator should have adequate Powers, proper resources and the capacity to perform its Functions and exercise its Powers.

BCBS Core Principles for Effective Banking Supervision

BCP2Independence, accountability, resourcing and Legal protection for supervisors

BCP2 EC1 The operational Independence, accountability and governance of the supervisor are prescribed in legislation and publicly disclosed. There is no government or industry interference that compromises the operational Independence of the supervisor. The supervisor has full discretion to take any supervisory actions or decisions on banks and banking groups under its supervision.

BCP2 EC2 The process for the appointment and removal of the head(s) of the supervisory authority and members of its governing body is transparent. The head(s) of the supervisory authority is (are) appointed for a minimum term and is removed from office during his/her term only for reasons specified in law or if (s)he is not physically or mentally capable of carrying out the role or has been found guilty of misconduct. The reason(s) for removal is publicly disclosed.

BCP2 EC6 The supervisor has adequate resources for the conduct of effective supervision and oversight. It is financed in a manner that does not undermine its Autonomy or operational Independence.

IAIS Insurance Core Principles

ICP2Supervisor

ICP2.1. The supervisor is operationally independent and free from undue government or industry interference that compromises that Independence.

ICP2.1.1. Operational Independence of the supervisor includes having the discretion to allocate its resources, including financial and human resources, and to carry out the supervisory process in accordance with its Objectives and the risks the supervisor perceives. Having this discretion, which underpins operational Independence, should be recognized in primary legislation.

ICP2.1.2. The supervisor should be financed in a manner that does not undermine its Independence. A wide variety of financing models exist, such as financing by government, levies imposed on supervised entities and combinations thereof. To help ensure the supervisor’s Independence is not compromised, the method in which it is financed should be stable, predictable and transparent, and prevent interference from its funding source.

ICP2.1.3. The institutional relationships and accountability frameworks between the supervisor and the government should be clearly defined in legislation.

ICP2.1.5. The legislation should define the responsibilities of the governing body. In cases where there are industry representatives or elected officials or government employees on the governing body of the supervisor, the composition of the governing body should be sufficiently diverse to prevent such representatives from controlling the supervisor.

ICP2.3. Procedures regarding the appointment and dismissal of the head of the supervisor and members of its governing body (if such a governing body exists) are transparent.

ICP2.3.1. Public procedures regarding the appointment and dismissal of the head of the supervisor enhance Independence, as they limit the potential for government interference in the management of the supervisor. Those procedures should be codified in legislation.

ICP2.3.2. Those procedures should disclose, for example, who appoints the head of the supervisor and members of the governing body, the length of those appointments and the reasons for which the head of the supervisor or members of the governing body can be dismissed before the end of their term, if applicable.

ICP2.3.3. Legislation should disclose the general criteria for appointing members of a governing body, including that they possess relevant qualifications, knowledge and experience to oversee the activities of the supervisor, as well as the mechanism for their remuneration (for example, salary, daily allowance or voluntary work). The procedures regarding the appointment of the members of the governing body should result in a balance of skills, knowledge and experience amongst the members of the governing body as a whole.

IOSCO Objectives and Principles of Securities Regulation

A. Principles Relating to the Regulator

P2 The Regulator should be operationally independent and accountable in the exercise of its Functions and Powers.

BCBS Core Principles for Effective Banking Supervision

BCP3 Cooperation and collaboration

Laws, regulations or other arrangements provide a framework for cooperation and collaboration with relevant domestic authorities and foreign supervisors. These arrangements reflect the need to protect confidential information.

IAIS Insurance Core Principles

ICP2Supervisor

ICP2.0.4.Transparency reinforces accountability. Transparency increases the predictability of supervision and shapes the expectations of supervised entities, which enhances supervisory effectiveness. For these reasons, supervisory requirements, supervisory processes as well as information about the supervisor’s responsibilities should be publicly disclosed, in a manner consistent with any confidentiality requirements imposed on the supervisor.

ICP2.7. The supervisor, including its staff and any third party acting on its behalf (presently or in the past), are required by legislation to protect confidential information in the possession of the supervisor.

ICP2.8.1. Transparency reinforces accountability of supervisors. The supervisor should publish information about itself and the insurance sector, including:

[…] supervisory measures taken in relation to problem or failed insurers, subject to confidentiality considerations and in so far as it does not jeopardize other supervisory Objectives or prejudice another case pending before the supervisor.

IOSCO Objectives and Principles of Securities Regulation

A. Principles Relating to the Regulator

P2: The confidential and commercially sensitive nature of much of the information in the possession of the regulator must be respected. Safeguards must be in place to protect such information from inappropriate use or disclosure.

BCBS Core Principles for Effective Banking Supervision

BCP1 Responsibilities, Objectives and Powers

BCP1 EC4 Banking laws, regulations and prudential standards are updated as necessary to ensure that they remain effective and relevant to changing industry and regulatory practices. These are subject to Public Consultation, as appropriate.

BCP2Independence, accountability, resourcing and Legal protection for supervisors

The supervisor possesses operational Independence, transparent processes, sound governance, budgetary processes that do not undermine Autonomy and adequate resources and is accountable for the discharge of its duties and use of its resources.

BCP5Licensing criteria

BCP5 EC2Laws or regulations give the licensing authority the power to set criteria for licensing banks.

IAIS Insurance Core Principles

ICP2 Supervisor

ICP2.9. The supervisor publishes its requirements, policies and supervisory procedures. The supervisor consults publicly on significant changes that it makes to requirements, policies and supervisory procedures.

ICP2.9.1. The supervisor publishes and regularly reviews requirements, policies and supervisory procedures to ensure they remain appropriate for the characteristics of the industry, emerging risks and evolving international standards. Some requirements may be contained in primary legislation, while others may be contained in instruments issued by the supervisor, such as guidance and industry advice. The supervisor should ensure these instruments are made available to the public, for example on the supervisor’s website.

ICP2.9.2. A critical element of transparency is for the supervisor to provide the opportunity for meaningful Public Consultation on proposed requirements and supervisory procedures. Meaningful Public Consultation benefits from participation by a diversity of stakeholders. Consequently, the supervisor should have methods in place to encourage and solicit stakeholder participation.

ICP2.9.4. In some jurisdictions, the development and issuance of requirements may be outside of the control of the supervisor; for example, the power to enact legislation may be vested in another government body or supranational bodies that have a direct role in the legislation in force in their member countries. In such cases, the consultation process may also be outside the remit of the supervisor. To the extent possible, the supervisor should be involved in the development of the requirements, for example, by participating in consultations, and the supervisor should keep the public and the industry informed of proposed changes.

IOSCO Objectives and Principles of Securities Regulation

A. Principles relating to the Regulator

P4 The Regulator should adopt clear and consistent regulatory process.

P4: In exercising its Powers and discharging its Functions, the regulator should adopt processes, which are:

• consistently applied

• comprehensible

•transparent to the public

• fair and equitable.

In the formulation of policy, the regulator should:

• have a process for consulting with the public including those who may be affected by the policy

•publicly disclose its policies in important operational areas; etc.

BCBS Core Principles for Effective Banking Supervision

BCP1 Responsibilities, Objectives and Powers

BCP1 EC6 When, in a supervisor’s judgment, a bank is not complying with laws or regulations, or it is or is likely to be engaging in unsafe or unsound practices or actions that have the potential to jeopardize the bank or the banking system, the supervisor has the power to:

(a) take (or require a bank to take) timely corrective action

(b) impose a range of sanctions

(c) revoke the bank’s license

(d) cooperate and collaborate with relevant authorities to achieve an orderly resolution of the bank, including triggering resolution where appropriate.

IAIS Insurance Core Principles

ICP2 Supervisor

ICP2.8.1. Transparency reinforces accountability of supervisors. The supervisor should publish information about itself and the insurance sector, including:

• its Objectives and responsibilities
• its goals and priorities for the future
• its activities in light of its goals and priorities in the previous year
• its resources, including human, technological and financial
• data and analysis about the state of the insurance sector
• supervisory measures taken in relation to problem or failed insurers, subject to confidentiality considerations and in so far as it does not jeopardize other supervisory Objectives or prejudice another case pending before the supervisor.

ICP4 Licensing

A legal entity which intends to engage in insurance activities must be licensed before it can operate within a jurisdiction. The requirements and procedures for licensing must be clear, objective and public, and be consistently applied.

ICP10Preventive Measures, Corrective Measures and Sanctions

The supervisor:

• requires and enforces preventive and corrective measures

• imposes sanctions

which are timely, necessary to achieve the Objectives of insurance supervision, and based on clear, objective, consistent, and publicly disclosed general criteria.

ICP10.0.4. […] In addition to general criteria, other parts of the framework on preventive measures, corrective measures and sanctions can also be released publicly, particularly where the supervisor feels that this additional transparency will lead to the market functioning more effectively.

BCBS Core Principles for Effective Banking Supervision

BCP4Permissible activities

BCP4 EC5 The supervisor or licensing authority publishes or otherwise makes available a current list of licensed banks, including branches of foreign banks, operating within its jurisdiction in a way that is Easily accessible to the public.

IAIS InsuranceCore Principles

ICP4 Licensing

ICP4.7. The supervisor publishes a complete list of licensed insurance legal entities and the scope of the licenses granted.

ICP4.7.1. The supervisor should publish the complete list of licensed insurance legal entities and clearly state the scope of license that has been granted to each insurance legal entity. This would provide clarity to the public as to which entities are licensed for specific classes of business.

ICP4.7.2. If the conditions or restrictions to the license would impact the public or any person dealing with the insurance legal entity, the supervisor should either publish these conditions or restrictions or require the insurance legal entity to disclose these conditions or restrictions accordingly. Conditions or restrictions that would impact the public could include, for example, the lines or classes of insurance business an insurance legal entity is permitted to conduct.

BCBS Core Principles for Effective Banking Supervision

BCP28Disclosure and transparency

BCP28 EC5 The supervisor or other relevant bodies regularly publishes information on the banking system in aggregate to facilitate public understanding of the banking system and the exercise of market discipline.

IAIS Insurance Core Principles

ICP2 Supervisor

ICP2.8.1. Transparency reinforces accountability of supervisors. The supervisor should publish information about itself and the insurance sector, including:

• its Objectives and responsibilities
• its goals and priorities for the future
• its activities in light of its goals and priorities in the previous year
• its resources, including human, technological and financial
• data and analysis about the state of the insurance sector
• supervisory measures taken in relation to problem or failed insurers, subject to confidentiality considerations and in so far as it does not jeopardize other supervisory Objectives or prejudice another case pending before the supervisor.

ICP24 Macroprudential Supervision

ICP24.5. The supervisor publishes relevant data and statistics on the insurance sector.

ICP24.5.1. The publication of data and statistics by the supervisor may enhance market efficiency by allowing market participants to make more informed decisions and reducing the cost to the public of acquiring insurance sector information. Moreover, the publication of data may serve as a market disciplining mechanism by facilitating comparisons of an individual insurer to the sector as a whole.

ICP24.5.2. The supervisor may provide access to sufficiently detailed data either by publishing data itself or by providing others with adequate means for publishing data. This could be achieved by engaging a government statistical office or cooperating with the local insurance sector; provided the supervisor is satisfied with the accuracy, completeness, frequency and timeliness of such publication.

BCBS Core Principles for Effective Banking Supervision

BCP2Independence, accountability, resourcing and Legal protection for supervisors

BCP2 EC1 The operational Independence, accountability and governance of the supervisor are prescribed in legislation in legislation and publicly disclosed.

BCP2 EC3 The supervisor publishes its Objectives and is accountable through a transparent framework for the discharge of its duties in relation to those Objectives.

IAIS Insurance Core Principles

ICP2Supervisor

ICP2.8. The supervisor is transparent to the public, supervised entities and the government about how it exercises its responsibilities.

ICP2.8.1. Transparency reinforces accountability of supervisors. The supervisor should publish information about itself and the insurance sector, including:

• its Objectives and responsibilities
• its goals and priorities for the future
• its activities in light of its goals and priorities in the previous year
• its resources, including human, technological and financial
• data and analysis about the state of the insurance sector; and

• supervisory measures taken in relation to problem or failed insurers, subject to confidentiality considerations and in so far as it does not jeopardize other supervisory Objectives or prejudice another case pending before the supervisor.
• ICP2.8.2. The supervisor should seek to publish a report at least annually that contains the elements listed above as well as its audited financial statements. This type of report is a key document by which a supervisor accounts to its stakeholders.

IOSCO Objectives and Principles of Securities Regulation

A. Principles relating to the Regulator

P2 The Regulator should be operationally independent and accountable in the exercise of its Functions and Powers.

P2: Accountability implies that the regulator is subject to appropriate scrutiny and review, including:

• periodic public reporting by the regulator on its performance

• transparency in the regulator’s process and conduct.

IAIS Insurance Core Principles

ICP2Supervisor

ICP2.1.3. The institutional relationships and accountability frameworks between the supervisor and the government should be clearly defined in legislation. It is important to specify the circumstances and processes for sharing information, consultation or approval between the supervisor and the government. This may include establishing what information should be provided, how each entity should consult on matters of mutual interest and when approval from relevant authorities is necessary. The daily operations of the supervisor should not be subject to consultation with or approval by the government. In exceptional circumstances, the supervisor may choose to consult with the government in relation to a supervisory decision where there are major socio-economic implications of that decision.

BCBS Core Principles for Effective Banking Supervision

BCP3Cooperation and collaboration

Laws, regulations or other arrangements provide a framework for cooperation and collaboration with relevant domestic authorities and foreign supervisors. These arrangements reflect the need to protect confidential information.

IAIS Insurance Core Principles

ICP25 Supervisory Cooperation and Coordination

The supervisor cooperates and coordinates with involved supervisors and relevant authorities to ensure effective supervision of insurers operating on a cross-border basis.

IOSCO Objectives and Principles of Securities Regulation

D. Principles for Cooperation in Regulation

¶14. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.

Legal Framework,

Mandate

KA 2 Resolution authority

2.1 […] Where there are multiple resolution authorities within a jurisdiction their respective mandates, roles and responsibilities should be clearly defined and coordinated.

2.2 Where different resolution authorities are in charge of resolving entities of the same group within a single jurisdiction, the resolution regime of that jurisdiction should identify a lead authority that coordinates the resolution of the legal entities within that jurisdiction.

EC2.1 The Legal Framework clearly identifies one or more resolution authorities and provides it or them with a clear Mandate. Where there are multiple resolution authorities or where multiple authorities are involved in a resolution process, the resolution regime provides for the identification of a lead authority; sets out clear arrangements to coordinate the resolution of affiliated legal entities, or the resolution of a single bank, within that jurisdiction; and provides for a clear allocation of Objectives, Functions and Powers of those authorities.

2.3 As part of its statutory Objectives and Functions, and where appropriate in coordination with other authorities, the resolution authority should: [not shown]

2.6. The resolution authority and its staff should be protected against liability for actions taken and omissions made while discharging their duties in the exercise of resolution Powers in good faith, including actions in support of foreign resolution proceedings.

EC2.6 The Legal Framework provides Legal protection through statute for the resolution authority, its head, members of the governing body and its staff and any agents against liability for actions taken or omissions made while discharging their duties in good faith and acting within the scope of their Powers, including actions taken in support of foreign resolution proceedings; including indemnification against any costs of defending any such actions.

KA 3 Resolution Powers

3.2 Resolution authorities should have at their disposal a broad range of resolution Powers, which should include Powers to do the following: [not shown]

EN3(e) Powers of the resolution authority—Where the EC refer to Powers of the resolution authority to take specific resolution actions, those Powers should be clearly set out in the Legal Framework applicable to the authority.

KA 2 Resolution authority

2.5 The resolution authority should have operational Independence consistent with its statutory responsibilities, transparent processes, sound governance and adequate resources and be subject to rigorous evaluation and accountability mechanisms to assess the effectiveness of any resolution measures. It should have the expertise, resources and the operational capacity to implement resolution measures with respect to large and complex firms.

EC2.3 The resolution authority is, by law and in practice, operationally independent in the performance of its statutory responsibilities.

EN2(d) Operational Independence

[…] Appropriate safeguards could include transparent appointment procedures; statutory constraints that would prevent the head of the resolution authority being removed during his or her term of office for reasons other than those specified in law; and public disclosure of the reason(s) for that early dismissal.

KA 2 Resolution authority

EC2.4 The resolution authority is accountable through a transparent framework for the discharge of its duties in relation to its statutory responsibilities.

Communication

(confidentiality)

KA 7 Legal Framework conditions for cross-border cooperation

7.6 The resolution authority should have the capacity in law, subject to adequate confidentiality requirements and protections for sensitive data, to share information […]

KA 2 Resolution authority

2.5 The resolution authority should have operational Independence consistent with its statutory responsibilities, transparent processes, sound governance and adequate resources and be subject to rigorous evaluation and accountability mechanisms to assess the effectiveness of any resolution measures.

EC2.4 The resolution authority is accountable through a transparent framework for the discharge of its duties in relation to its statutory responsibilities.

KA 3 Resolution Powers

3.1 […] There should be clear standards or suitable indicators of non-viability to help guide decisions on whether firms meet the conditions for entry into resolution.

EC3.1 The Legal Framework includes clear criteria that provide for timely and early entry into resolution before a bank is balance sheet insolvent, when a bank is no longer viable or when it is likely to be no longer viable and, in either case, has no reasonable prospect of return to viability.

EN3(c) Quantitative or qualitative criteria to assess non-viability the conditions for entry into resolution or exercise of resolution Powers should be clear and transparent and set out in law:

KA 3 Resolution Powers

3.2 Resolution authorities should have at their disposal a broad range of resolution Powers, which should include Powers to do the following: [not shown]

EN3(f)(iii) Exercisable without shareholder or creditor consent–[…] In order to ensure legal certainty and transparency to shareholders and creditors, the Powers to override any requirement for consent should be clear.

EN3(r)Regulatory requirements for bridge institutions—The Legal Framework should be transparent as to what capital and other regulatory requirements, if any, will apply to bridge institutions.

KA 4 Set-off, netting, collateralization, segregation of client assets

4.1 The Legal Framework governing set-off rights, contractual netting and collateralization agreements and the segregation of client assets should be clear, transparent and enforceable during a crisis or resolution of firms, and should not hamper the effective implementation of resolution measures.

EN4(a) Prohibition or Temporary stay of early termination rights—[…] Where the Legal Framework includes both kinds of provision, it should be clear in advance, for any type of such contract, which provision would apply to those early termination rights in a resolution of the financial institution under the domestic regime.

KA 5 Safeguards

5.1 Resolution Powers should be exercised in a way that respects the hierarchy of claims while providing flexibility to depart from the general principle of equal (pari passu) treatment of creditors of the same class, with transparency about the reasons for such departures, if necessary to contain the potential systemic impact of a firm’s failure or to maximize the value for the benefit of all creditors as a whole.

KA 6 Funding of firms in resolution

EN6(b) Use of deposit insurance funds for resolution—Where a deposit insurance fund can be used in resolution, there should be transparent rules and policies on the use of such funds, including clarity on the extent of the contribution that may be made.

KA 7 Legal Framework conditions for cross-border cooperation

7.4 […] The treatment of creditors and ranking in insolvency should be transparent and properly disclosed to depositors, insurance policy holders and other creditors.

7.5 Jurisdictions should provide for transparent and expedited processes to give effect to foreign resolution measures, either by way of a mutual recognition process or by taking measures under the domestic resolution regime that support and are consistent with the resolution measures taken by the foreign home resolution authority.

KA 1 Scope

1.1 The regime should be clear and transparent as to the financial institutions (hereinafter “firms”) within its scope.

EC1.1 The scope of application of the resolution regime and the circumstances in which it applies are clearly defined in the Legal Framework.

KA 2 Resolution authority

2.7 The resolution authority should have unimpeded access to firms where that is material for the purposes of resolution planning and the preparation and implementation of resolution measures.

EC2.7Under the Legal Framework, the resolution authority has unimpeded access to the domestic premises of banks where necessary for the purposes of resolution planning and the preparation and implementation of resolution measures.

KA 2 Resolution authority

2.5 The resolution authority should have operational Independence consistent with its statutory responsibilities, transparent processes, sound governance and adequate resources and be subject to rigorous evaluation and accountability mechanisms to assess the effectiveness of any resolution measures.

EC2.4 The resolution authority is accountable through a transparent framework for the discharge of its duties in relation to its statutory responsibilities. This framework includes procedures for reviewing and evaluating actions that the resolution authority takes in carrying out its statutory responsibilities, and the periodic publication of reports on its resolution actions and policies, as necessary.

EN2(e) Accountability

The requirement for procedures for reviewing and evaluating actions that the resolution authority takes in carrying out its statutory responsibilities may be satisfied by procedures for internal review by management or a function within the resolution authority. Provision for review of the effectiveness of the resolution authority in meeting its statutory Objectives by an appropriate external body would strengthen accountability. The resolution authority should also publish periodic reports on its resolution actions and policies relating to its Mandate and its statutory Objectives at sufficiently frequent intervals to keep stakeholders and the public adequately informed about the authority’s resolution activities. Public reports may include case-specific reports that are released once the resolution of a bank has concluded, assessing the outcome of the resolution and the effectiveness with which the resolution was carried out by reference to the statutory Objectives. The resolution authority should however not be required to disclose publicly the operational resolution plans or results of resolvability assessments of individual banks.

KA 2 Resolution authority

2.1 […] Where there are multiple resolution authorities within a jurisdiction their respective mandates, roles and responsibilities should be clearly defined and coordinated.

EC2.1 The Legal Framework clearly identifies one or more resolution authorities and provides it or them with a clear Mandate. Where there are multiple resolution authorities or where multiple authorities are involved in a resolution process, the resolution regime provides for the identification of a lead authority; sets out clear arrangements to coordinate the resolution of affiliated legal entities, or the resolution of a single bank, within that jurisdiction; and provides for a clear allocation of Objectives, Functions and Powers of those authorities.

2.2 Where different resolution authorities are in charge of resolving entities of the same group within a single jurisdiction, the resolution regime of that jurisdiction should identify a lead authority that coordinates the resolution of the legal entities within that jurisdiction.

KA 9 Institution-specific cross-border cooperation agreements

9.2 The existence of agreements should be made public. The home authorities may publish the broad structure of the agreements, if agreed by the authorities that are party to the agreement.

Policy decisions,

Supporting analysis,

Decision-making process

Responsibility C: Disclosure of Policies with Respect to FMIs

Central banks, market regulators, and other relevant authorities should clearly define and disclose their regulatory, supervisory, and oversight policies with respect to FMIs.

Key considerations

1. Authorities should clearly define their policies with respect to FMIs, which include the authorities’ Objectives, roles, and regulations.

2. Authorities should publicly disclose their relevant policies with respect to the regulation, supervision, and oversight of FMIs.

Explanatory note

P4.3.2. Authorities should publicly disclose their relevant policies with respect to the regulation, supervision, and oversight of FMIs, as public disclosure promotes consistent policies. Such disclosure typically involves communicating the authorities’ regulatory, supervisory, and oversight standards for FMIs and helps to establish clear expectations and facilitate compliance with those standards. Furthermore, disclosing policies publicly communicates the responsibilities and expectations of authorities to the wider public and thereby promotes the accountability of those authorities. Authorities can publicly disclose their policies in a variety of forms, including plain-language documents, policy statements, and relevant supporting material. Such materials should be readily available.

Responsibility A: Regulation, Supervision, and Oversight of FMIs

FMIs should be subject to appropriate and effective regulation, supervision, and oversight by a central bank, market regulator, or other relevant authority.

Key considerations

1. Authorities should clearly define and publicly disclose the criteria used to identify FMIs that should be subject to regulation, supervision, and oversight.

Explanatory note

P4.1.2. Authorities should clearly define and publicly disclose the criteria used to identify FMIs that should be subject to regulation, supervision, and oversight. The precise framework for making such decisions may vary across jurisdictions. In some countries, for example, there is a statutory framework, while in others, the central bank or other relevant authorities have greater discretion to set the criteria use. A basic criterion, however, is the function of the FMI. Systemically important payment systems, CSDs, SSSs, CCPs, and TRs are typically subject to regulation, supervision, and oversight because of the critical role that they play in the financial system.

Authorities should publicly disclose their relevant policies with respect to the regulation, supervision, and oversight of FMIs, as public disclosure promotes consistent policies. Such disclosure typically involves communicating the authorities’ regulatory, supervisory, and oversight standards for FMIs and helps to establish clear expectations and facilitate compliance with those standards. Furthermore, disclosing policies publicly communicates the responsibilities and expectations of authorities to the wider public and thereby promotes the accountability of those authorities. Authorities can publicly disclose their policies in a variety of forms, including plain-language documents, policy statements, and relevant supporting material. Such materials should be readily available.

Responsibility D: Application of the Principles for FMIs

Central banks, market regulators, and other relevant authorities should adopt the CPSS-IOSCO Principles for financial market infrastructures and apply them consistently.

Key considerations

1. Authorities should adopt the CPSS-IOSCO Principles for financial market infrastructures.

2. Authorities should ensure that these principles are, at a minimum, applied to all systemically important payment systems, CSDs, SSSs, CCPs, and TRs.

3. Authorities should apply these principles consistently within and across jurisdictions, including across borders, and to each type of FMI covered by the principles.

Explanatory note

P4.4.1. Central banks, market regulators, and other relevant authorities should adopt the CPSS-IOSCO Principles for financial market infrastructures. The adoption and application of these principles can greatly enhance regulatory, supervisory, and oversight efforts by relevant authorities and support the establishment of important minimum standards for risk management. While the precise means through which the principles are applied will vary from jurisdiction to jurisdiction, all CPSS and IOSCO members are expected to apply the principles to the relevant FMIs in their jurisdictions to the fullest extent allowed by the Legal Framework in their jurisdiction.

1. Introduction

General applicability of the principles

P1.20. The presumption is that all CSDs, SSSs, CCPs, and TRs are systemically important, at least in the jurisdiction where they are located, typically because of their critical roles in the markets they serve. If an authority determines that a CSD, SSS, CCP or TR in its jurisdiction is not systemically important and, therefore, not subject to the principles, the authority should disclose the name of the FMI and a clear and comprehensive rationale for the determination. Conversely, an authority may disclose the criteria used to identify which FMIs are considered as systemically important and may disclose which FMIs it regards as systemically important against these criteria. These principles are designed to apply to domestic, cross-border, and multicurrency FMIs.

Responsibility E: Cooperation with Other Authorities

Central banks, market regulators, and other relevant authorities should cooperate with each other, both domestically and internationally, as appropriate, in promoting the safety and efficiency of FMIs.

Key considerations

1. Relevant authorities should cooperate with each other, both domestically and internationally, to foster efficient and effective communication and consultation in order to support each other in fulfilling their respective mandates with respect to FMIs. Such cooperation needs to be effective in normal circumstances and should be adequately flexible to facilitate effective communication, consultation, or coordination, as appropriate, during periods of market stress, crisis situations, and the potential recovery, wind-down, or resolution of an FMI.

2. If an authority has identified an actual or proposed operation of a cross-border or multicurrency FMI in its jurisdiction, the authority should, as soon as it is practicable, inform other relevant authorities that may have an interest in the FMI’s observance of the CPSS-IOSCO Principles for financial market infrastructures.

3. Cooperation may take a variety of forms. The form, degree of formalization and intensity of cooperation should promote the efficiency and effectiveness of the cooperation and should be appropriate to the nature and scope of each authority’s responsibility for the supervision or oversight of the FMI and commensurate with the FMI’s systemic importance in the cooperating authorities’ various jurisdictions. Cooperative arrangements should be managed to ensure the efficiency and effectiveness of the cooperation with respect to the number of authorities participating in such arrangements.

7. Relevant authorities should provide advance notification, where practicable and otherwise as soon as possible thereafter, regarding pending material regulatory changes and adverse events with respect to the FMI that may significantly affect another authority’s regulatory, supervisory, or oversight interests.

9. Each authority maintains its discretion to discourage the use of an FMI or the provision of services to such an FMI if, in the authority’s judgment, the FMI is not prudently designed or managed, or the principles are not adequately observed. An authority exercising such discretion should provide a clear rationale for the action taken both to the FMI and to the authority or authorities with primary responsibility for the supervision or oversight of the FMI.

Explanatory note

P4.1.3. The division of Powers or responsibilities among authorities for regulating, supervising, and overseeing FMIs may vary depending on the applicable legal and institutional framework and the sources of such Powers or responsibilities may take different forms. Preferably, legislation will clearly specify which authority or authorities have responsibility.

P4.5.1. Central banks, market regulators, and other relevant authorities should cooperate with each other, domestically and internationally (that is, on a cross-border basis), in order to support each other in fulfilling their respective regulatory, supervisory, or oversight mandates with respect to FMIs. Relevant authorities should explore, and where appropriate, develop cooperative arrangements that take into consideration [...]

P4.5.2. Cooperative arrangements need to foster efficient and effective communication and consultation among relevant authorities. Such arrangements need to be effective in normal circumstances and should be adequately flexible to facilitate effective communication, consultation, or coordination, as appropriate, during periods of market stress, crisis situations, and the potential recovery, wind-down, or resolution of an FMI. Inadequate cooperation, especially during times of market stress and crisis situations, can impede significantly the work of relevant authorities.

Explanatory note

Identification of FMIs and relevant authorities

P4.5.3. If an authority has identified an actual or proposed operation of a cross-border or multicurrency FMI in its jurisdiction, the authority should, as soon as it is practicable, inform other relevant authorities that may have an interest in the FMI’s observance of the CPSS-IOSCO Principles for financial market infrastructures. To determine whether such notification is appropriate, the authority should consider (to the extent it has such information) the nature and scope of other relevant authorities’ regulatory, supervisory, or oversight responsibilities with respect to the FMI and the FMI’s systemic importance in those authorities’ jurisdictions.

Advance notification

P4.5.10. Relevant authorities should provide advance notification, where practicable and otherwise as soon as possible thereafter, regarding pending material regulatory changes and adverse events with respect to the FMI that may significantly affect another authority’s regulatory, supervisory, and oversight interests. In particular, for cross-border or multicurrency FMIs, where other authorities may have an interest in the FMI's observance of the principles, advance notification arrangements should take into account the authorities’ responsibilities with respect to the FMI's potential systemic importance to their jurisdictions.