Although the financial crisis brought about more stringent stress testing, in addition to greater liquidity and reporting requirements, not enough has been done in regards to rules and supervision, former banking regulator Julie Dickson told a University of Toronto conference on Wednesday.
Specifically, the Basel III reform, which was agreed to in 2017, has seen a very long implementation timeline that will go on until 2027 — approximately 20 years from the start of the financial crisis.
Speaking at the Rotman School of Management’s conference examining lessons learned from the global financial crisis, Dickson, a former head of the Office of the Superintendent of Financial Institutions (OSFI), said the lengthy timeline does not encourage much confidence.
Furthermore, a number of Global Systemically Important Banks (G-SIBs) have not yet established co-operation agreements. “You need a co-operation agreement in place for resolution across borders to work in a crisis,” she says.
The topic has been discussed for years, but an agreement still has not been made, Dickson adds.
“From a Canadian perspective, Canadians typically have been better situations, in part, because OSFI has a lot of authority when it comes to capital,” she says. “It typically exceeds international rules.”
Regardless, there is no room for complacency, Dickson says.
Equally important, is the day-to-day supervision of institutions, which Dickson says remains a weak spot.
A well-staffed supervisor with resources and the right skills should become more and more important over time as new products are developed, and as artificial intelligence is on the rise.
“Even a bank that is well-managed benefits hugely from an intensive supervisor who does drill downs, thematic reviews and tells the bank how they’re comparing with their peers,” Dickson says.
“If a supervisor is not doing that — and I can tell you that there are a lot of supervisors in the world who are not — it really matters.”