Financial Stability Board Calls for 'Urgent Action' to Close Gaps in Liquidity Provision for Failing Banks

06:05 AM EDT, 10/09/2026 (MT Newswires) -- The Financial Stability Board called on its member jurisdictions to take "urgent action" to address and close the gaps it found in their ability to provide emergency liquidity assistance to failing banks for an orderly resolution. In a peer review published Friday, the FSB said the incomplete implementation of its guidance related to public sector backstop funding, or PBF, poses a risk to global financial stability, as this affects crisis preparedness and weakens financial authorities' ability to resolve a systemic bank. "Only about one in five FSB member jurisdictions are fully compliant with [Key Attribute] 6, while about half have material gaps. Most gaps relate to the credibility of PBF mechanisms, with fewer than half of jurisdictions having mechanisms that are clear, capable of providing liquidity at the required scale, and able to be used in a timely manner," according to the global financial system risks watchdog. The UK is one of only four jurisdictions found to be fully compliant with the FSB's guidance on PBF mechanisms, alongside the US, Japan and Hong Kong. In its evaluation, the watchdog found the UK to have high operational readiness and funding flexibility, with full compliance on tools for loss recovery. Meanwhile, Switzerland was found to be largely compliant in terms of implementation of loss recovery tools, with high operational readiness but low funding flexibility, leading to an overall assessment of "materially non-compliant." The FSB assessed the European Banking Union to have a high level of operational readiness with fully compliant loss recovery safeguards. Overall, however, the EBU was found to be materially non-compliant, mainly due to its low funding flexibility, given that the jurisdiction is home to seven global systemically important banks. "The FSB has set a demanding but necessary standard for the design of public sector backstops. Having a credible public sector backstop funding mechanism is essential," said Soledad Núñez, the Spanish central bank's deputy governor who chaired the FSB's peer review. "This report does not assess jurisdictions' overall ability to respond to financial crises, but it does identify one critical issue that needs addressing. Further work is urgently needed to complete implementation of the FSB's recommendation on public sector backstops."