G20 financial regulatory reforms uneven: FSB

Reforms to bank capital and liquidity are ahead of schedule, whereas reforms to over-the-counter (OTC) derivatives markets are falling behind

By: James Langton
November 9, 2015 December 19, 2017
15:15

Regulatory reforms by the G20 since the financial crisis have been uneven, with bank capital reforms well advanced, but other measures lagging behind, the Basel-based Financial Stability Board (FSB) announced on Monday.

According to the FSB’s first annual report to the G20 on the progress at implementing global reforms, the Basel III reforms to bank capital and liquidity are ahead of schedule, whereas reforms to over-the-counter (OTC) derivatives markets are behind schedule. Shadow banking reforms remain at an early stage, the FSB report notes, as are efforts to implement effective resolution regimes.

The global banking sector has been made more resilient by the reforms, and that this has been achieved without any major unintended consequences, the FSB report concludes.

However, looking ahead, policymakers will have to monitor the risk of spill-over effects on some emerging markets; ensure an open and integrated global financial system, and monitor the impact of recent shifts in fixed income market liquidity, the FSB report says. The FSB is working with standard-setters in all three areas to analyze, and possibly address these issues, the report says.

The FSB report also calls on the G20 to deal with some of the other impediments to reform, such as enabling resolution authorities to share information across borders, addressing duplicative requirements on cross-border OTC derivatives transactions, removing legal barriers to OTC derivatives trade reporting and ensuring that national regulators are adequately resourced.

“Monitoring implementation of agreed reforms, analysing the effects of the measures, and making adjustments to address any identified material unintended consequences, represent good regulatory practice and are essential to accountability of the FSB. This new series of annual reports will enable the G20 to assess whether the financial reforms are achieving their intended results in an effective manner and thereby supporting financial stability and sustainable growth,” said Mark Carney, chairman of the FSB, in a statement.