Financial Stability Board Reports To The G20 On Progress And Next Steps Towards Ending “Too-Big-To-Fail”

The Financial Stability Board (FSB) published today a report prepared for the upcoming G-20 Summit on Progress and Next Steps Towards Ending “Too-Big-To-Fail”.

The report takes stock of the progress made in implementing the FSB’s policy framework for reducing the moral hazard posed by systemically important financial institutions (SIFIs), which was endorsed by the G20 in November 2010. Good progress has been made in putting this international policy framework in place and there are signs that firms and markets are beginning to adjust to authorities’ determination to end “too-big-to-fail”.However, more needs to be done through legislation, regulation and internationalagreements to end the “too-big-to-fail” problem.

The report sets out the further actions that are required from the G-20, the FSB and other international bodies to complete the policy initiative to end “too-big-to-fail”. 

In particular, jurisdictions should:

• Undertake the legislative reforms that are necessary to implement the “Key Attributes of Effective Resolution Regimes for Financial Institutions” by 2015 for all parts of the financial sector that could cause systemic problems, including systemically important insurers and financial market infrastructure, such as central counterparties;
• Empower domestic authorities to share information and cooperate fully.
• Take legislative action as necessary to make resolution effective in a cross-border context;
• Address impediments to resolvability that arise from complexities in firms’ legal, financial and operational structures;Consider complementary domestic structural measures that help promote financial stability and improve the resolvability of financial institutions without posing unnecessary constraints on the integration of the global financial system or creatinginvectives for regulatory arbitrage; 
• Implement policy measures for domestic systemically important banks; and
• Ensure that supervisors have the capacity to resource themselves and the independence to meet their mandate.

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