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Banks ’living wills’ heavily criticized as inadequate by U.S. regulators, praised by Canada’s OSFI
8 August 2014
See important August 16 updated story on ’living wills’ by Paul Gallagher (CRC)—Heavy criticism in the United States of Too Big To Fail Banks occurred following this week’s publication of the report of the Financial Stability Oversight Board (FSOB) on ‘living wills’, one of the key measures that was introduced internationally in the wake of the 2008 financial crisis and mandated under the Dodd-Frank Act of 2010 in the United States. A strategic analysis of the matter is to be found in the short write up by Executive Intelligence Review’s Paul Gallagher entitled “All U.S. Regulators Admit: Banks Are Too Complex To Fail, May Have To Be Broken Up”. In Canada, the Financial Post took the occasion of the (FSOB’s) report to send a written query to the chief regulator of Canada’s largest banks, the Office of the Superintendent of Financial Institutions (OSFI), who were “satisfied” with progress on living wills in Canada, as reported by Barbara Shecter in her August 7 “Canadian banks win praise rather than scorn from regulators in contrast to U.S.” “To date we are satisfied with the contributions made, and the level of importance assigned to this issue by the institutions,” Canada’s Office of the Superintendent of Financial Institutions said in an emailed statement to the Financial Post, reports Shecter. What follows in the Post article is an attempt by Shecter to explain in part the reasons for the contrast of the reactions of regulators from Washington from those sitting in Ottawa. Also on the question of the Canadian bail-in Shecter closes her article by comparing the upcoming “bail-in” regime in Canada with her understanding of the bail-in regime in place in the United States: “Canada is also in the midst of creating a “bail-in” regime that would trigger the conversion of debt instruments into equity to support a failing bank. The aim of such a regime, which also contemplates the potential cancellation of existing bank shares, is to keep governments – and therefore taxpayers — from having to fund a bail-out in the unlikely event of a bank failure. “Federal financial minister Joe Oliver kicked off a six-week consultation on the proposed Canadian bail-in regime last week. “A bail-in regime in the United States has similar goals but is different from the Canadian proposal. In the event a U.S. bank was about to fail, debt at the bank’s holding company would be converted into equity in scaled-down operating subsidiaries.” [GG] |