The Financial Stability Board (FSB) says that there’s more work to be done on global regulatory reforms, and the G20 finance ministers and central bank governors are promising to continue that work.
The FSB Monday published a letter from its chairman and governor of the Bank of Canada, Mark Carney, to the G20 ministers reporting that solid progress has been made in financial reforms, including in several priority areas, such as: building resilient financial institutions; ending “too big to fail”; strengthening the oversight and regulation of shadow banking activities; and, completing reforms related to oversight of the over-the-counter derivatives markets.
The key to making these reforms effective, the letter notes, is timely, consistent and complete implementation. And, on that count, it says that progress has been uneven, and that there is still “significant work” ahead.
The report notes that the FSB will start public consultations on proposed regulatory reforms to address concerns about shadow banking activities, soon. It says that resolution planning for systemically important global banks remains uneven, and that weak risk controls at these banks are still a concern. It also calls for more work to reduce the reliance on credit ratings.
In his letter, Carney concludes that, while much progress has been made, “the tasks ahead remain considerable”, and he calls on the G20 ministers for their support. And, following their meeting, the G20 ministers reaffirmed their commitment to implementing the financial regulatory reform agenda.
“Our main focus in the period ahead will be to rebuild confidence and to reduce risks and volatility in international financial markets; contribute to a faster pace of economic recovery and job creation, and promote the foundations for strong, sustainable, and balanced growth. We are firmly committed to open trade and investment, expanding markets and resisting protectionism in all its forms,” they said in their communique, adding that global growth remains modest and downside risks are still elevated.
Once again, they pledged to adopt reforms for the over-the-counter derivatives markets, and to act by the end of the year to identify and address conflicts, inconsistencies and gaps in national frameworks, including in the cross-border application of rules. They also called for finalized policy measures on the oversight and regulation of shadow banking in time for the St. Petersburg Summit in Sept. 2013.
“We encourage further work to enhance transparency of and competition among credit rating agencies and ask [the International Organization of Securities Commissions (IOSCO)] to provide a report on ongoing work at our meeting in April,” they said. They’re also expecting a report from IOSCO at that meeting regarding the credit default swaps market.
The G20 ministers also noted that they are concerned about the slow progress toward a single set of accounting standards, and they called on the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) to complete their work promptly.
In terms of the efforts to overhaul financial benchmarks, such as LIBOR, the G20 ministers said that they welcome the actions taken so far. And, they acknowledged the work done by the International Financial Consumer Protection Network on best practices in consumer protection, and said they look forward to a progress report at the St. Petersburg summit.