St Petersburg, 05/09/2013 (Agence Europe) - The Financial Stability Board (FSB), set up under the aegis of the G20 to orchestrate global financial reform, says that the important work done to reinforce the solidity of the banking system, along with transparency on the derivatives markets and surveillance of shadow banking have considerably boosted the global financial system's ability to cope with any future turbulence.
Svein Andersen, the FSB's secretary general, says the global financial system is much more robust now than it was at the time that the 2008 financial crisis broke out. He was speaking on Thursday 5 September at the opening of the G20 Summit in St Petersburg.
Among the real progress achieved, he listed completing transposition of the international Basel III agreement to boost the quality and quantity of bank capital requirements in 18 of the 20 members of the G20. Only Indonesia and Turkey have yet to complete the legislative process (see EUROPE 10910). In order to meet the 2019 deadline for increasing optimal quality capital requirements (CET1), major banks' capital deficits must be less than half their accumulated annual profit. On the “too-big-to-fails”, Andersen said that under the Russian Presidency of the G20, methodologies and policies had been developed to ensure better supervision of the 28 banks identified as too big to fail and to dismantle them in the event of problems.
The FSB has presented the G20 with two interim reports on shadow banking, based on talks among world leaders on how to regulate financial bodies that are not banks as such but act, like banks, as financial intermediaries. Andersen said they were examining the idea of laying down rules to govern the extent of leverage that regulated banks can grant bodies active in shadow banking. In response to questions from this newsletter, he said that the draft legislation unveiled by the European Commission the day before fitted perfectly with the work being carried out at international level (see EUROPE 10914). He said that in setting a definite level of capital for money market funds, the Commission's legislation went slightly beyond the FSB's recommendations.
Andersen mentioned the work in progress on governance of market benchmarks and the search for a coordinated approach to setting strict standards in order to prevent manipulation. An assessment by the IOSCO committee of regulators and bourses will be published in the spring of next year. On 18 September, the European Commission will unveil draft legislation on the governance of benchmarks, following in the wake of the Libor and Euribor scandals.
Andersen commented on the work to reduce over-reliance on financial ratings, the idea being to minimise volatility arising from investors being forced to adjust their holdings in line with changes in the ratings given by credit rating agencies. (MB/transl.fl)