Identifying and minimising risks, ensuring stability and avoiding bail-outs

The aims of recovery and resolution planning are to identify risks to the stability of the financial system due to systemically important financial institutions and to find viable ways to deal with the negative impact of a crisis. Maintaining economically vital functions is of central importance, as is avoiding government bail-outs. Ultimately, the plan must set out how a systemically important financial institution can be enabled to recover or exit the market in an orderly fashion.
A recovery and resolution plan (RRP) covering a financial institution in its entirety, complete with all its special local features, helps to reduce or eliminate legal differences affecting international financial institutions owing to the absence of international insolvency law. It should create a framework for resolving such institutions in an orderly manner without destroying value or interrupting systemically important functions.

It must be possible to put resolution measures in place over a single weekend and, as far as possible, without any government assistance.

National and international emergency planning

National governments require systemically important banks to draw up emergency plans for their specific jurisdiction. For a global systemically important bank (G-SIB), the global resolution plan includes all national emergency plans. Its aim is to combine these into an overall view so that the G-SIB can exit the market in an orderly fashion while maintaining systemically important functions and at the same time avoiding disruption to national and international financial markets, as well as the destruction of value. The global resolution plan must strike a balance between various national interests and legal requirements involved in resolving a G-SIB and integrate it into the national plans.

International cooperation

FINMA is responsible for drafting resolution plans for Swiss-based G-SIBs, which must provide it with the information and data it needs. Drafting the plan is a dynamic process that requires extensive interaction between FINMA and the institution. FINMA thus works together with foreign supervisory authorities within specially formed crisis management groups (CMGs), as well as through bilateral and multilateral contact.