FSB has reported to G20 on progress of the key financial regulatory reforms. It is pleased with progress in the four key areas of:
- building resilient financial institutions: FSB comments that, although the transitional phase of Basel 3 begins in January 2013, because only eight of the 27 Basel Committee members have issued their final regulations to implement it, this means only six of the identified 28 global systemically important banks (G-SIBs) will be subject to Basel 3 at that date. It urges all jurisdictions to implement Basel 3 quickly. The Basel Committee will publish an analysis of implementation status in each relevant jurisdiction;
- ending the “too-big-to-fail” problem: FSB is critical of implementation of agreed reforms in this area. Although legislative proposals for resolution plans are advanced, there is uneven headway in resolution planning for global systemically important financial institutions (G-SIFIs). There is a new list of G-SIBs (see below), which removes three and adds two banks to the previous list. FSB calls for more intense SIFI supervision, and the application of rules for G-SIBs to banks identified as domestic systemically important banks (D-SIBs). FSB notes the work done by International Organisation of Securities Commissions (IOSCO), the Basel Committee and the International Association of Insurance Supervisors (IAIS) in identifying systemically important firms and methodologies for assessing resolvability of Financial Market Infrastructures;
- strengthening oversight and supervision of shadow banking entities: FSB, with the Basel Committee and the IOSCO, agrees shadow banking should be subject to appropriate oversight proportionate to the risks to financial stability. It has agreed specific measures suitable for money markets, securitisations and secured financing contracts. It intends to consult on implementing its recommendations soon; and
- creating continuous “core” markets by implementing the OTC derivatives market reforms: FSB was pleased to report all its jurisdictions have committed to central clearing. For more detail, see below.
FSB’s briefing also covered:
- the Global Legal Entity Identifier (LEI) system;
- addressing data gaps left by the crisis;
- strengthening reporting and disclosures of major banks;
- accounting convergence;
- reducing reliance on credit rating agencies;
- monitoring the impact of reform on emerging economies; and
- FSB’s own resources, capacity and governance.
We summarise the key papers supporting FSB’s report below. (Source: FSB Publishes Reform Progress Report)