FSB wrote to G20 in advance of the Seoul Summit outlining the progress to date of financial regulatory reforms. It focused on the Basel III standards and its own work to address the moral hazard risks associated with SIFIs. It published its policy framework on SIFIs, which the Summit endorsed, and which calls for:
- improvements to resolution regimes to minimise disruption of failures and to ensure the taxpayer does not have to bear the costs;
- a requirement on SIFIs (particularly G-SIFIs) to have loss absorption capacity beyond Basel III;
- more intensive oversight of institutions that may pose a systemic risk;
- better core financial infrastructures to reduce contagion risks if one institution fails; and
- peer reviews of national policy.
It also looked at necessary improvements to supervisory intensity and effectiveness, including ensuring supervisors have proper early intervention powers, and the importance of OTC derivatives reforms and measures to reduce reliance on Credit Rating Agency (CRA) ratings.