Four jurisdictions meet the required standards
The review looked at how well countries can manage failing banks without using taxpayers’ money for bailouts. It follows the banking turmoil of 2023, when several lenders came under severe liquidity pressure within a short period. FSB assessed 19 jurisdictions. Only the United States, the United Kingdom, Japan, and Hong Kong fully met the watchdog’s standards for public-sector emergency funding arrangements.
India and Argentina were found to be non-compliant, while Australia, Brazil, the European Union, China and Switzerland were among those identified as materially non-compliant. Canada, Mexico, South Africa, South Korea and Singapore were largely compliant, according to the newspaper’s report.
The findings highlight differences in countries’ readiness to manage the failure of a systemically important bank, whose collapse could affect the wider financial system.
The FSB’s review focuses specifically on public-sector backstop funding, rather than assessing every tool available to authorities during a banking crisis. Such arrangements are intended to provide temporary liquidity when a bank undergoing resolution cannot obtain sufficient funding from its own resources or financial markets.
The framework is devised to support an orderly resolution, allowing a bank’s essential functions to continue without necessarily requiring public ownership or an expensive bailout.
Credit Suisse rescue highlights need for preparedness
The 2023 rescue of Credit Suisse illustrates why emergency funding plans matter. After the Swiss lender suffered severe liquidity stress, UBS took it over in a government-engineered rescue. The transaction was supported by emergency liquidity facilities, a government liquidity backstop, and the write-down of Additional Tier 1 (AT1) bonds.
The episode demonstrated how quickly confidence can deteriorate and liquidity pressures can intensify, even at a major financial institution.
The FSB wants authorities to identify in advance the temporary public funding that could be made available during a bank failure. It has also called for a clear legal basis for providing assistance and powers to recover any losses incurred through emergency support.
The aim is to ensure that funding can be provided quickly enough to support an orderly resolution while limiting risks to taxpayers and discouraging banks from taking excessive risks in the expectation of government assistance.
Soledad Núñez, the deputy governor of the Bank of Spain and chair of the FSB peer review, said a credible public-sector backstop funding mechanism was essential.
The watchdog’s findings underline the need for governments to establish and test emergency funding arrangements before a crisis occurs, rather than attempting to design them under pressure when a bank is already failing.