The Financial Stability Board (FSB) has published a report concerning the implementation and effects of the G20 financial regulatory reforms.
The report notes that:
- implementation of Basel III capital and liquidity standards has generally been timely and consistent with the Basel framework in most jurisdictions. Banks remain on track to meet the standards;
- implementation of the policy framework for ending too-big-to-fail which consists of higher loss absorbency, more intensive supervision and key attributes of effective resolution has advanced the most for global systemically important banks but substantial work remains in implementing effective resolution regimes;
- implementation of the over-the-counter derivatives reforms is well underway, although it continues to be uneven and behind schedule. Progress is most advanced in the largest derivatives markets. Trade repositories and central counterparties are increasingly used; and
- a number of policies were recently finalised in the area of transforming shadow banking into resilient market-based finance (e.g. money market funds, risk alignment of securitisation), so implementation is generally at an early stage.
The FSB has identified certain areas that merit ongoing attention and these include:
- no major unintended consequences have been identified to date from the implementation of reforms in emerging market and developing economies (EMDEs). However, some EMDEs face challenges in implementing the reforms or are affected by spill-overs from implementation in home jurisdictions of global financial institutions; and
- there has been some concerns that the depth of liquidity in fixed income markets has declined in recent years. However, evidence of this is mixed, and the unsustainable excess liquidity that existed prior to the crisis should not be used as a baseline for comparison. The FSB is analysing the causes and financial stability consequences of any shifts in market liquidity.