FSB: Over Half of Jurisdictions Have Significant Gaps in Bank Crisis Funding Mechanisms
nashnova research
The Financial Stability Board reviewed 19 jurisdictions and found fewer than half have clear, adequately sized emergency funding arrangements that can be deployed quickly — nearly two decades after the 2008 crisis, most major economies still cannot ensure an orderly resolution of the next large bank failure.
What exactly was this review looking for?
The FSB asked one core question: when a major bank fails, can the government provide emergency liquidity to wind it down or sell it off — without nationalizing it?
This mechanism is called the "lender of last resort" — the government stepping in as the final source of funds after all market options are exhausted. It sounds like the basics, but most countries still haven't built it.
This means → when a crisis hits, these countries must improvise — emergency decrees, ad hoc rescues. The 2023 Credit Suisse bailout was exactly that.
Who passed and who failed?
Fully compliant — only 4: the US, the UK, Japan, and Hong Kong.
Broadly compliant — 5: Canada, South Korea, Mexico, Singapore, and South Africa.
Materially non-compliant — 8: Australia, Brazil, China, the EU Banking Union, Indonesia, Saudi Arabia, Switzerland, and Turkey.
Fully non-compliant — 2: India and Argentina — neither country has any form of public emergency liquidity mechanism in place.
What did the Credit Suisse crisis reveal?
After Credit Suisse faced severe liquidity stress in 2023, the Swiss government orchestrated its takeover by UBS, deploying emergency liquidity facilities, government backstop funding, and bond write-downs — multiple tools at once.
The FSB credited Switzerland with "a high degree of crisis preparedness," but flagged one critical issue: the entire rescue relied on emergency decrees, not a pre-established legal framework.
In plain terms = Switzerland got it done, but the method was "act first, write the rules later" — that may not work next time.
Is the EU's €81 billion fund enough?
The EU's Single Resolution Fund has accumulated over €81 billion, a substantial sum on paper.
But the FSB sees a limit: once the fund runs dry, its ability to raise more in debt markets is uncertain.
This means → even with legal tools to impose losses on shareholders and recapitalize systemic banks, without temporary public funding as a backstop, a resolution plan may simply be unworkable.
What did the FSB prescribe?
Identify funding sources in advance: authorities should know, before a crisis, where the money will come from.
Establish a legal basis: create clear legal authority for emergency support — no more relying on emergency decrees each time.
Secure recovery powers: any public money deployed must come with a mechanism to recoup losses, so taxpayers are not left holding the bill.
This reflects the FSB's core judgment — the question is not "should we rescue banks?" but "can we produce the money, within the law, within days?"
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