{
  "title": "Impact of Regulatory Reforms on Large and Complex Financial Institutions",
  "publication": "IMF Staff Position Notes, November 3, 2010",
  "sourceUrl": "https://www.imf.org/en/publications/imf-staff-position-notes/issues/2016/12/31/impact-of-regulatory-reforms-on-large-and-complex-financial-institutions-24314",
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  "summary": "Financial sector reforms are being considered to address the risks posed by large and complex financial institutions (LCFIs). The vast majority of global finance is intermediated by a handful of these institutions with growing interconnections within and across borders.",
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    {
      "heading": "Background and objectives",
      "content": "- Financial sector reforms are being considered to address risks posed by large and complex financial institutions (LCFIs).\n- The vast majority of global finance is intermediated by a handful of these institutions with growing interconnections within and across borders.\n- Common trends that contributed to the recent global crisis included:\n  - sharp increases in leverage,\n  - significant reliance on short-term wholesale funding,\n  - growth of off-balance-sheet activities,\n  - maturity mismatches,\n  - increased share of revenues from complex products and trading activities.\n- Key objective of the reforms: promote a less leveraged, less risky (or better cushioned), and thus a more resilient financial system that supports strong and sustainable economic growth."
    },
    {
      "heading": "Findings on capital standards and bank resilience",
      "content": "- The recent proposals of the Basel Committee on Banking Supervision (BCBS) on capital standards represent a substantial improvement in the quantity and quality of capital in comparison with the pre-crisis situation.\n- Analysis suggests that, subject to usual caveats associated with limited data disclosures and availability:\n  - phase-in arrangements will allow most banks to move to these higher standards through earnings retention, assuming a modest economic and earnings outlook.\n  - should banks generate strong earnings in the coming years, and distribute lower dividends, they could rebuild common equity capital ratios faster than required under the current phase-in periods.\n- The ultimate effect of the reforms on business models remains to be seen until the regulations take their final shape."
    },
    {
      "heading": "Impact on investment-banking-type activities and other regulatory measures",
      "content": "- The new capital standards will have a significant impact on investment-banking-type activities, including through tighter requirements for trading book exposures.\n- Investment banking activities will also be affected by a host of other regulatory initiatives, including:\n  - the new accounting rules,\n  - higher standards for securitization, derivatives, and trading businesses,\n  - measures to restrain certain activities.\n- LCFIs with an investment banking focus have flexible business models and can adjust their strategies easily to mitigate the effects of the regulatory reforms, notwithstanding a multitude of regulations affecting their activities."
    },
    {
      "heading": "Publication and document specifics",
      "content": "- Authors: Inci Ötker, Ceyla Pazarbasioglu\n- Publication date: November 3, 2010\n- Series: Staff Position Note No. 2010/016\n- Issue: 016\n- Volume: 2010\n- Pages: 38\n- DOI: https://doi.org/10.5089/9781462345496.004\n- ISBN: 9781462345496\n- ISSN: 2617-6742\n- Subjects and keywords include: Banking; Capital adequacy requirements; Commercial banks; Countercyclical capital buffers; Financial institutions; Financial regulation and supervision; Financial services; Investment banking; Liquidity requirements; bank; Basel capital regulation; conservation buffer; derivatives business; liquidity risk profile; SPN; Global; Europe; North America.\n\nIMF Staff Position Note: \"Impact of Regulatory Reforms on Large and Complex Financial Institutions\" (Staff Position Note No. 2010/016), Inci Ötker and Ceyla Pazarbasioglu, November 3, 2010.\n\n---\n\n Content in this bundle\n\n- spn1016\n  - spn1016 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - spn1016 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/imf-staff-position-notes/issues/2016/12/31/impact-of-regulatory-reforms-on-large-and-complex-financial-institutions-24314"
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    "Authors: Inci Ötker, Ceyla Pazarbasioglu",
    "Published: November 3, 2010",
    "Series: IMF Staff Position Notes",
    "DOI: https://doi.org/10.5089/9781462345496.004",
    "Financial sector reforms are being considered to address risks posed by large and complex financial institutions (LCFIs).",
    "The vast majority of global finance is intermediated by a handful of these institutions with growing interconnections within and across borders.",
    "Common trends that contributed to the recent global crisis included:",
    "Key objective of the reforms: promote a less leveraged, less risky (or better cushioned), and thus a more resilient financial system that supports strong and sustainable economic growth.",
    "The recent proposals of the Basel Committee on Banking Supervision (BCBS) on capital standards represent a substantial improvement in the quantity and quality of capital in comparison with the pre-crisis situation.",
    "Analysis suggests that, subject to usual caveats associated with limited data disclosures and availability:",
    "The ultimate effect of the reforms on business models remains to be seen until the regulations take their final shape.",
    "The new capital standards will have a significant impact on investment-banking-type activities, including through tighter requirements for trading book exposures.",
    "Investment banking activities will also be affected by a host of other regulatory initiatives, including:",
    "LCFIs with an investment banking focus have flexible business models and can adjust their strategies easily to mitigate the effects of the regulatory reforms, notwithstanding a multitude of regulations affecting their activities.",
    "Authors: Inci Ötker, Ceyla Pazarbasioglu",
    "Publication date: November 3, 2010",
    "Series: Staff Position Note No. 2010/016",
    "Issue: 016",
    "Volume: 2010",
    "Pages: 38",
    "DOI: https://doi.org/10.5089/9781462345496.004",
    "ISBN: 9781462345496",
    "ISSN: 2617-6742",
    "Subjects and keywords include: Banking; Capital adequacy requirements; Commercial banks; Countercyclical capital buffers; Financial institutions; Financial regulation and supervision; Financial services; Investment banking; Liquidity requirements; bank; Basel capital regulation; conservation buffer; derivatives business; liquidity risk profile; SPN; Global; Europe; North America.",
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