U.S., E.U regulators sign ‘arrangement’ over cross-border bank resolutions

U.S. and European banking regulators would share a basis for exchange of information and cooperation in the resolution of financial institutions, with a goal of maintaining financial stability, under a cooperation arrangement announced Thursday.

The arrangement, agreed to by the Federal Deposit Insurance Corp. (FDIC) and the Single Resolution Board (SRB), is intended to “strengthen cross border resolvability by enhancing communication and cooperation, and to work together in planning and conducting an orderly cross border resolution,” the two agencies stated in a joint release. “The goal is to facilitate the resolution of banks present across the respective jurisdictions while maintaining financial stability in the United States and the European Union,” the agencies stated.

The SRB is the is the central resolution authority within the Banking Union (BU), a European Union-level banking and supervision system. Formed in 2012, the group assumed responsibility for banking policy from the various countries within the EU (that is, those that chose to transfer the responsibility) to the EU level. The group was formed in response to the the Eurozone debt crisis, which began in 2009.

The SRB’s mission, it states, is “to ensure an orderly resolution of failing banks with minimum impact on the real economy and public finances of the participating Member States and beyond.”

“Many large financial institutions have a global presence,” the agencies stated in their release. “Officials from the SRB and FDIC are continuously coordinating with other resolution authorities, tackling the challenges of bank resolution and preparing for effective cross border resolution, if needed.”

The agencies stated that cooperation among resolution authorities is important to help ensure that Global Systemically Important Banks (GSIBs) can fail without major systemic consequences. “Bilateral arrangements signed between resolution authorities to underpin this cooperation are an important ingredient for building resolvability together and for advance planning for resolution,” they stated.

Joint Release/Single Resolution Board and Federal Deposit Insurance Corporation sign Cooperation Arrangement