Friday, 22 March 2013

Open Bank Resolution Plan - Supranational theft by international private banking crime ring

The term - Open Bank Resolution Plan - has made international headlines in March of 2013 due to events surrounding sovereign debt crisis in Cyprus.
Iain Parker the author of this blog posted the below concerns about this scheme being orchestrated on a global scale back in early 2011 on his previous blog on another server than this one that was suspended in February 2013 with no reason given after six years of trouble free publishing.
In reading this I ask you to consider are there any less bank depositors in a nation than there are taxpayers?

Read the stated objective of the plan below and take the time to learn about senior secured bond holders and observe how they remain whole while all below them get whacked;

"The objective of an effective resolution regime is to make feasible the resolution of any financial institution without severe systemic disruption and without exposing taxpayers to loss while protecting vital economic functions through mechanisms which make it possible for shareholders and unsecured and uninsured creditors to absorb losses in their order of seniority."

New Zealand A Vassal State Ruled By Senior Creditors Of The Supranational Private Banking Network.
International banking regulators Bail-in instead of Bail-out plans
still privatise the profits and socialise the losses. We keep, you
give. Instead of “Senior Secured Creditors” being bailed out by
unsuspecting taxpayers, as has been the case so far, they are
going to be bailed out by unsuspecting savers who don’t realise
they are in-fact unsecured creditors!

International Financial Stability Board (FSB) Consultation Document On Effective Resolution Framework For Systemically Important Financial Institutions.

19 JULY 2011
FSB Overview;
The FSB has been established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. It brings together national authorities responsible for financial stability in significant international financial centres, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts.
A list of institutions represented on the FSB can be found here;
The FSB is chaired by Mario Draghi, Governor of the Bank of Italy. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.
Effective Resolution of Systemically Important
Financial Institutions 19 July 2011
Pg 3
The Financial Stability Board (FSB) is seeking comments on its Consultative Document on Effective Resolution of Systemically Important Financial Institutions.
This Consultative Document contains a comprehensive package of
proposed policy measures to improve the capacity of authorities to resolve systemically important financial institutions (SIFIs) without systemic disruption and without exposing the taxpayer to the risk of loss, and a time line for their implementation. The Consultative Document consists of a cover note and eight closely interrelated annexes. Annexes 1-6 comprise proposed recommendations as set out below, while Annexes 7-8 comprise discussion notes reflecting preliminary FSB views:
Resolution powers and tools
1. Key Attributes of Effective Resolution Regimes. This sets out the powers and tools that all jurisdictions’ regimes for resolution of financial institutions should have to be effective, including for resolution of cross-border SIFIs.
2. Bail-in within Resolution. This sets out proposed essential elements of a bail-in regime to enable creditor-financed recapitalisation of financial institutions.
Pg 7
The disorderly collapse of Lehman Brothers in September 2008 provided a sharp and painful lesson of the costs to the financial system and the global economy of the absence of powers and tools for dealing with the failure of a SIFI. Lehman Brothers was the last SIFI allowed to fail during the last financial crisis. All other SIFIs at
risk were supported by public capital injections, asset or liability guarantees, or exceptional liquidity measures undertaken by central banks.
While this was necessary for economic and financial stability reasons, public bail-outs placed taxpayer funds at unacceptable risks and has increased moral hazard in a very significant way. A recent stock-take undertaken by the Basel Committee on Banking Supervision (BCBS) of progress in implementing its Recommendations on Cross-border Bank Resolution of March 2010 shows that while some jurisdictions have enacted or are considering legislative changes, many jurisdictions continue to lack important resolution tools. The report underlines the need to accelerate reforms of domestic resolution regimes and tools
and of frameworks for cross-border enforcement of resolution actions.
At their Summits in Pittsburgh, Toronto and Seoul, the G20 Leaders asked the FSB to set out more effective arrangements for resolution of SIFIs. The Annexes to this document set out the proposed policy recommendations, which are described in the following pages. They comprise four key building blocks:
1 Strengthened national resolution regimes that give a designated resolution authority a broad range of powers and tools to resolve a financial institution that is no longer viable and there is no reasonable prospect of it becoming so.
2 Cross-border cooperation arrangements in the form of bilateral or multilateral institution-specific cooperation agreements, underpinned by national law, that will enable resolution authorities to act collectively to resolve cross-border firms in a more orderly, less costly way.
3 Improved resolution planning by firms and authorities based on ex
ante resolvability assessments that should inform the preparation of RRPs and that may, if necessary, require changes to individual firm structures and business practices to make them more effectively resolvable.
4 Measures to remove obstacles to resolution arising from fragmented information systems, intra-group transactions, reliance on service providers and the provision of global payment services.
Pg 8
The measures to improve resolution regimes and tools set out in this consultative document represent a “bookend” to the FSB’s policy framework for addressing the systemic and moral hazard risks associated with SIFIs that are “too-big, too complex and too-interconnected-to-fail”. The other “bookend” of the FSB’s policy
framework is a requirement that global SIFIs (G-SIFIs) hold additional loss absorption capacity, as set out for banks in a separate consultative document from the BCBS released today( ) The framework also comprises requirements for more intensive and effective supervisory oversight of SIFIs, as set out in the FSB’s November 2010 report, and improvements to financial market infrastructures (FMIs) both to strengthen their robustness and reduce counterparty exposures, so as to reduce systemic contagion from a SIFI failure.

Many countries entered this crisis without a proper resolution regime, and no country had a regime that could cope with failing SIFIs. Where effective resolution tools existed, these did not address the cross border dimension or obstacles stemming from within firms themselves. This meant that proper market discipline was not in place in the years preceding the crisis and made the handling of the crisis more difficult. The G20 called on the FSB to propose actions to address these challenges. These proposed policy recommendation are offered for public consultation ahead of finalising the recommendations for the G20 Leaders in November. Their effective implementation would entail changes in laws and regulation, supervisory practice and cross-border cooperation as well as within firms.

I. Proposed policy recommendations Effective resolution regimes
A national resolution regime should provide the authorities with the tools to intervene safely and quickly to ensure the continued performance of the firm’s systemically important functions. It should ensure prompt payout or transfer of insured deposits and prompt access to transactions accounts as well as to segregated client funds, wherever they are located. It should enable the
transfer or sale of viable portions of the firm while apportioning losses, including to unsecured and uninsured creditors, in a manner that is fair and predictable and so avoids panic or destabilisation of financial markets.
Pg 9
An effective national resolution regime should provide a broad range of options to resolve a financial institution that is no longer viable. It needs a designated administrative authority with a statutory mandate to promote financial stability in the exercise of its resolution powers. This resolution authority should have the expertise, resources, capacity and operational independence consistent with their statutory responsibilities to exercise those
powers, including for large and complex institutions such as SIFIs. And just as is the case for supervisors, the law should provide for legal protection against lawsuits for actions or omission made while discharging their duties in good faith.
It should be able to act with the necessary speed. In those jurisdictions where a court order is required, it should consider any possible delay in its resolution planning process. If more than one authority has responsibilities in the domestic resolution process, their respective powers and cooperation mechanism should be clear, and a lead authority should be identified to coordinate the resolution process of a group with multiple entities in the jurisdiction.
Statutory financial stability objectives
A resolution authority should have the powers and tools to meet the following key objectives:
􀀀 to preserve those of the SIFI’s operations that provide vital services to the financial system and the wider economy, which would cause system-wide damage if lost;
􀀀 to avoid unnecessary loss in value of financial assets and contagion (direct and indirect) to other parts of the financial system; and
􀀀 to ensure that losses are borne by those with whom the risks
properly reside – first shareholders, and unsecured and uninsured creditors - rather than taxpayers.
Pg 10
Any mechanism for addressing a firm’s assets and the associated allocation of losses while it is resolved will need to:
􀀀 allow authorities to take control of the firm within resolution, replacing management and directors if necessary;
􀀀 facilitate the continuity of essential financial functions by allowing for their transfer of the underlying financial contracts that support them to a sound third party or a bridge company;
􀀀 give the resolution authority all powers necessary to operate and resolve the firm, including powers to terminate contracts, continue or assign contracts, purchase or sell assets, and take other actions necessary to restructure or wind down the firm’s operations; and
􀀀 respect the hierarchy of claims that would apply in a liquidation, and ensure that no creditors are worse off than they would be in liquidation, so as to preserve creditors’ legal rights.

Legal capacity to enable cross-border coordination of resolution

Cross-border resolution is impeded by major differences in national resolution regimes, absence of mutual recognition to give effect to resolution measures across borders, and lack of planning for handling stress and resolution. The complexity and integrated nature of many firms’ group structures and operations, with multiple legal entities spanning national borders and business lines, make rapid and orderly resolutions of these institutions under current regimes virtually impossible. Legislative changes are likely to be needed in many jurisdictions to ensure that resolution authorities have resolution powers with regard to all financial institutions operating in their jurisdictions, including the local branch operations of foreign institutions. Cross-border cooperation and effective pre-planning of resolution will be difficult if not impossible if the authority over failed institutions, including foreign bank branches, resides with the courts. As part of its statutory objectives, the resolution authority should duly consider the potential impact of its resolution actions on financial stability in other jurisdictions. It should have the legal capacity to cooperate and coordinate effectively with foreign resolution authorities, to exchange information in normal times and in crisis, and to draw up and implement RRPs and cooperation agreements on an institution-specific basis.
Pg 12
Bail-in powers
The paper on Bail-in within Resolution sets out the essential elements of statutory powers within a special resolution procedure and possible contractual provisions to achieve a creditor-financed recapitalisation of systemically vital functions of an ailing financial institution. Such powers enable the resolution authority to write-down or convert into equity unsecured and uninsured claims, with a view to maintaining continuity of systemically vital functions, by either recapitalising the entity providing these functions, or, alternatively, capitalising a newly established entity or bridge institution to which these vital functions have been transferred following closure of the residual firm.
Resolution authorities should have bail-in powers within resolution to implement at least one of the above mechanisms...........
The objective of bail-in is to reduce the loss of value and the economic disruption associated with insolvency proceedings for financial institutions, yet ensure that the costs of resolution are borne by the financial institutions’ shareholders and unsecured creditors.
The FSB proposes that authorities put in place statutory bail-in powers within their resolution regimes as a complement to other resolution tools. Bail-in powers could be activated alone but most likely would be used in combination with other resolution tools. The capacity to bail-in creditors would enhance resolution options and
foster market discipline by countering the expectation that public funds will be used to support failing financial institutions. Resolution authorities should have the statutory power, but not the obligation, to apply a bail-in within resolution.
Pg 13 - 14
Cross-border cooperation
The recent crisis was made considerably worse by obstacles to the ability of home and host authorities to cooperate in the resolution of SIFIs. Some of these obstacles are legal barriers, and a legally binding international treaty would be a comprehensive means of addressing this for the global good. Although an internationally agreed model law exists that addresses cross-border cooperation in
corporate insolvencies, there is no immediate prospect of an equivalently formal multilateral agreement addressing the set of issues raised in the resolution of financial institutions. In its absence, bilateral or multilateral cooperation agreements are needed, setting out how those jurisdictions most affected will cooperate over the resolution of individual firms, both in the planning phase and during a crisis itself........
The cross-border effectiveness of resolution measures would be improved if both home and host authorities had the requisite powers and regimes, applying not only to domestically- incorporated banks but to domestic branches of foreign banks, and to assets, liabilities and contracts of foreign banks located within a jurisdiction. These should empower authorities to cooperate in the application of a range of special resolution tools to local operations, including the power to transfer assets, liabilities and contracts of the bank to a foreign bridge bank or private sector purchaser without the consent of the counterparties.
Statutory mandates to foster cross-border cooperation Cooperation and trust among resolution authorities should be built up. The mandates of resolution authorities should be framed so that they have to duly consider the potential impact of their resolution actions on financial stability in other jurisdictions. In applying resolution powers to individual components of a financial group, the resolution authority should have to take into account the overall impact on the group as a whole and the impact on financial stability in other jurisdictions concerned and undertake best efforts to avoid taking actions that could reasonably be expected to trigger instability elsewhere in the group or in the financial system.
Pg 18 - 19
Timelines for implementation of G-SIFI related recommendations
The gap between the arrangements necessary for effective resolution of firms and the arrangements that are currently in place is wide. The proposals in this paper need much detailed follow-up work, including on planning for individual firms and on bilateral and multilateral cooperation between authorities. Authorities need to be accountable to each other and to the public for taking the steps needed to achieve the objectives of the proposals. 
The SIFI Recommendations call for RRPs and firm-specific cooperation agreements to be put in place for all G-SIFIs. In this respect, the time line and key milestones that authorities should work towards in their immediate tasks of developing RRPs and conducting resolvability assessments for G-SIFIs; and enhancing crossborder cooperation among home and key host authorities of G -SIFIs are set out below.
Cross-border Cooperation Agreements
􀀀 Before the end of 2011, home authorities of G-SIFIs should have begun engaging with key host authorities as regards institution-specific cooperation agreements.
􀀀 By June 2012, the modalities for information sharing within the CMGs and the first drafts of the cooperation agreements should be completed.
􀀀 By December 2012, home authorities of G-SIFIs should have entered into cooperation agreements with the key host authorities.
Recovery and Resolution Plans
􀀀 By December 2011, the first drafts of the recovery plans should be completed.
􀀀 By June 2012, the first drafts of the resolution plans should be completed.
􀀀 By December 2012, both the recovery plans and the resolution plans should be completed.
Resolvability Assessments
􀀀 By June 2012, home authorities of G-SIFIs should have entered into discussions with firms and members of their respective CMGs as regards the preliminary assessment of the firms’ resolvability.
􀀀 By December 2012, the first resolvability assessments should be completed.
CMG Outreach
􀀀 By June 2012, CMGs should have identified the jurisdictions where the respective firms have a systemically important presence, but are not represented in the CMGs.
􀀀 By December 2012, the modalities for cooperation and information sharing between the home authorities and the host authorities of jurisdictions not represented in the CMG where the G-SIFIs have a systemically important presence, should be established.
Key attributes of effective resolution regimes for financial institutions 
At Seoul in November 2010, the G20 Leaders asked the FSB to set out Key Attributes of Effective Resolution Regimes, comprising frameworks and tools for the effective resolution of financial groups to help mitigate the systemic disruption of financial institution failures and reduce moral hazard.
The following Key Attributes set out the essential features that should be part of the resolution regimes of all jurisdictions. In many cases, legislation will be needed to put these features in place. Not all resolution powers set out in the Key Attributes are suitable for all sectors and all circumstances. Further sector-specific guidance would be provided as necessary for the application of this framework to insurance companies, financial market infrastructures (FMIs) and other financial institutions, including non-bank systemically important financial institutions (SIFIs).
The objective of an effective resolution regime is to make feasible the resolution of any financial institution without severe systemic disruption and without exposing taxpayers to loss while protecting vital economic functions through mechanisms which make it possible for shareholders and unsecured and uninsured creditors to absorb losses in their order of seniority.
An effective resolution regime should:
􀀀 ensure continuity of systemically critical financial services and functions;
􀀀 protect insured depositors and insurance policy holders and ensure the rapid return of segregated client assets;
􀀀 allocate losses on firm owners (shareholders) and unsecured and uninsured creditors in their order of seniority;
􀀀 not rely on public solvency support and not create an ex ante expectation that such support will be available;
􀀀 avoid unnecessary destruction of value, and therefore minimise the overall costs of resolution in home and host jurisdictions;
􀀀 provide for speed and transparency and as much predictability as possible through legal and procedural clarity and advanced planning for orderly resolution;
􀀀 provide a mandate in law for cooperation, information exchange and coordination domestically and among relevant foreign resolution authorities before and during a resolution;
􀀀 ensure that non-viable financial institutions can exit the market in an orderly way; and
􀀀 be credible and thereby provide incentives for market-based solutions.

What It All Means For New Zealand Citizens;

Freezing deposits plan slammed
“Plans that would freeze a portion of all deposits in a failed bank could cause widespread hardship”
The Reserve Bank has proposed that a portion of deposits in a bank that is placed in statutory management be retained to provide enough liquidity to allow the bank to quickly reopen.
Under the proposed Open Bank Resolution policy, a failed bank must be able to reopen by 9am the following business day and provide customers with full or partial access to their money.”
from RBNZ;
Mr Spencer said: “The design of major Reserve Bank prudential
policies such as outsourcing and local incorporation will help to
facilitate the implementation of OBR. The pre-positioning of banks’
internal systems represents the next stage in that implementation

By providing creditors with access to a portion of funds immediately, OBR avoids or minimises what has become a costly 
trade-off between protecting liquidity and enhancing market discipline.

In effect, it mitigates the risk that urgent liquidity concerns dictate 
how losses are allocated between shareholders, creditors and (perhaps) government.

The key elements of a comprehensive OBR process can be 
broken down into the following phases:

• imposition of statutory management and closure of the bank;

• imposition of the haircut on creditors’ accounts and term deposits to freeze a portion of funds;

• re-opening of the bank for core transactions business, with 
appropriate guarantees in place; and

• determination of the final resolution of the bank involving

decisions on future operations and restructuring.

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