{
  "title": "Finish the Job on Financial Regulation",
  "publication": "IMF Blog, January 23, 2014",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2014/01/23/finish-the-job-on-financial-regulation",
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  "summary": "Author: José Viñals",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Author: José Viñals\n- Date: January 23, 2014\n- Context: Call for completing the global financial regulatory reform agenda launched five years ago; emphasis on G-20 summit in Brisbane and the role of international standard setters and the IMF."
    },
    {
      "heading": "Progress in reforms",
      "content": "- “The design of these rules is largely complete, and the focus is now shifting to the nitty-gritty of their implementation by countries.”\n- Key achievements cited:\n  - Basel III regulations making banks more resilient by requiring higher and better capital and liquidity.\n  - Intensified supervision and additional capital requirements for global systemically important banks, on top of Basel III levels.\n  - Requirements in key economies (United States, the European Union, and Japan) for systemically important institutions to prepare “living wills” to facilitate resolution and minimize taxpayer involvement.\n  - National measures to reduce banks’ size and complexity: Volcker rule (United States), Vickers reform (United Kingdom), and forthcoming European Union regulation based on the Liikanen proposals.\n- Notable laggard: accounting standards reform “stuck in low gear for too long.”"
    },
    {
      "heading": "The too-important-to-fail problem",
      "content": "- Central concern: expectation that governments will stand behind systemically important financial institutions, creating an implicit public subsidy that lowers funding costs, encourages excessive risk taking, and can lead to taxpayer-funded bailouts.\n- Quoted emphasis: “Too-big-to-fail was a major part of the source of the crisis. And we will not have successfully responded to the crisis if we don’t address that problem successfully.” — Ben Bernanke\n- Current gaps:\n  - Implicit subsidies to systemically important financial institutions “remain too large.”\n  - IMF working on new analysis of implicit subsidies to these institutions to be published in April."
    },
    {
      "heading": "Focus on bank resolution (especially cross-border)",
      "content": "- Main point: one key unfinished element is bank resolution, particularly across borders; many countries remain ill-equipped for a Lehman Brothers-style bankruptcy with assets and liabilities across jurisdictions.\n- Recent progress examples:\n  - Agreements on the European Union’s bank recovery and resolution directive and the planned European single resolution mechanism.\n  - Continuing implementation of the United States’ Dodd-Frank legislation.\n  - Agreement in principle by officials in the United States and the United Kingdom to address cross-border resolution.\n- Cross-border exposure note: biggest U.S. banks “hold almost 70 percent of their on and off-balance sheet foreign assets in the United Kingdom.”\n- Specific unresolved tasks:\n  - Remove legal obstacles to cross-border resolution in areas such as derivatives and national insolvency regimes.\n  - Reach agreement on the amount, nature, and location of “bail-in-able” bank debt available to absorb losses.\n  - Build an unprecedented level of trust among officials in different countries through strong cooperation and uncompromising implementation of agreed reforms to avoid ring-fencing and balkanization of global finance."
    },
    {
      "heading": "Policy recommendations and next steps",
      "content": "- Immediate priorities for policymakers:\n  - Complete the remaining elements of the G-20 reform agenda, with particular focus on addressing too-important-to-fail through effective resolution regimes.\n  - Remove legal obstacles to cross-border resolution (derivatives, insolvency regimes).\n  - Agree on rules for “bail-in-able” bank debt (amount, nature, location).\n  - Build mutual trust and cooperation among national authorities to support cross-border resolution and prevent ring-fencing.\n- Role of international actors:\n  - G-20 leaders should continue to support the Financial Stability Board’s work and have the political will to implement agreed reforms.\n  - The IMF will contribute resources and expertise, collaborate with the Financial Stability Board and international standard setters, and assist members through surveillance and technical assistance.\n- Short-term milestone: the G-20 summit in Brisbane as the focal point to finalize and implement the reform agenda.\n\nSource: Finish the Job on Financial Regulation — José Viñals, January 23, 2014\n\n---\n\n\n References\n\n- reduce the size and complexity of banks\n\nSource: https://www.imf.org/en/blogs/articles/2014/01/23/finish-the-job-on-financial-regulation"
    }
  ],
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    "Authors: Jose-Vinals",
    "Published: January 23, 2014",
    "Author: José Viñals",
    "Date: January 23, 2014",
    "Context: Call for completing the global financial regulatory reform agenda launched five years ago; emphasis on G-20 summit in Brisbane and the role of international standard setters and the IMF.",
    "“The design of these rules is largely complete, and the focus is now shifting to the nitty-gritty of their implementation by countries.”",
    "Key achievements cited:",
    "Notable laggard: accounting standards reform “stuck in low gear for too long.”",
    "Central concern: expectation that governments will stand behind systemically important financial institutions, creating an implicit public subsidy that lowers funding costs, encourages excessive risk taking, and can lead to taxpayer-funded bailouts.",
    "Quoted emphasis: “Too-big-to-fail was a major part of the source of the crisis. And we will not have successfully responded to the crisis if we don’t address that problem successfully.” — Ben Bernanke",
    "Current gaps:",
    "Main point: one key unfinished element is bank resolution, particularly across borders; many countries remain ill-equipped for a Lehman Brothers-style bankruptcy with assets and liabilities across jurisdictions.",
    "Recent progress examples:",
    "Cross-border exposure note: biggest U.S. banks “hold almost 70 percent of their on and off-balance sheet foreign assets in the United Kingdom.”",
    "Specific unresolved tasks:",
    "Immediate priorities for policymakers:",
    "Role of international actors:",
    "Short-term milestone: the G-20 summit in Brisbane as the focal point to finalize and implement the reform agenda.",
    "[reduce the size and complexity of banks](http://blogs.imf.org/2013/05/14/banking-on-reform-can-volcker-vickers-and-liikanen-resolve-the-too-important-to-fail-conundrum/)"
  ],
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