Financial Stability Board finds only four of 19 jurisdictions fully compliant on bank resolution funding backstops

The Financial Stability Board has published a thematic peer review finding that implementation of public sector backstop funding mechanisms for systemic banks remains uneven and incomplete. Only four of 19 assessed jurisdictions fully comply with the relevant standard, while eight are materially noncompliant and two are noncompliant. The review, initiated after the 2023 bank failures exposed the speed of acute liquidity stress, focuses on temporary public liquidity as a last resort after private sources are exhausted rather than on jurisdictions’ overall crisis management capabilities. Fewer than half of the jurisdictions have mechanisms that are clear, capable of providing funding at the required scale and deployable within resolution timelines. Common weaknesses include unclear coordination between funding sources, insufficient or capped capacity, limited cross-authority testing and incomplete procedures for converting resources into cash. Although most jurisdictions have some loss-recovery and moral hazard safeguards, gaps can leave taxpayers exposed if funding is not repaid. The strongest arrangements combine operational readiness with pre-arranged access to flexible public resources, supported by tools to allocate losses to shareholders and creditors and recover residual costs from the financial sector. The FSB recommends urgent action to establish and coordinate backstops before a crisis, ensure sufficient scale and flexibility, test rapid deployment, strengthen loss recovery and moral hazard safeguards, and improve cross-border and foreign-currency preparations. It will support implementation through good-practice sharing and updated materials, while monitoring jurisdictions’ progress under Key Attribute 6 and its Guiding Principles.