FSB Chair Dynamic Reforms

On Apr. 20, FSB Chair Carney said reform implementation to be dynamic.

  • Adjust measures if unnecessary duplication, inconsistencies, or unintended impacts.
  • Resist steps that would fragment the global financial system, such as trade barriers.
  • Build system of deference to each other’s approaches, when outcomes comparable.
  • Post-Reform Conduct
  • Due to effort of FSB, the financial system is safer, simpler and fairer to participants.
  • Increase in capital, addressed non-bank asset managers, allow failure via resolution.
  • Market discipline is coming back, are also addressing the root causes of misconduct.
  • Banks’ misconduct costs of $320bn, capital could have supported $5 trillion lending.
  • Improve firm governance and compensation structures to align better risks, rewards.
  • New global standards of conduct in fixed income, commodities and currency market.
  • Reforms to financial benchmark arrangements, to reduce risks of being manipulated.
  • Senior Manager Accountability
  • Cited UK Senior Managers Regime (SMR) for senior decision-makers, of major firms.
  • SMR addresses creates link between seniority and accountability for action beneath.
  • Managers must take steps-training/oversight-to prevent or stop regulatory breaches.
  • Some global firms were voluntarily adopting part of SMR’s certification requirement.
  • FSB is now reviewing merit of such responsibility mapping, on an international basis.
  • Promoting Dynamism
  • Essential to fully implement G20 reforms, but should do so as efficiently as possible.
  • Authorities must learn by doing and make adjustments as needed to optimize effort.
  • FSB is developing structured framework to evaluate reforms, deliver to G20 Summit.
  • Support better impact analysis and inform future decisions on possible adjustments.
  • Completing Reforms
  • Risk of reform fatigue on implementation momentum, Brexit negotiation outcomes.
  • Need to complete Basel III, and ending too big to fail, system is at fork in the road.
  • Require that shadow banking fully transformed into resilient market-based finance.
  • Durable market infrastructure is in place, complete the job of ending too big to fail.
  • Ensure that emerging vulnerabilities were addressed in a timely, consistent manner.
  • Resisting Fragmentation
  • Lack of trust and cooperation would harden fragmentation, and disrupt capital flow.
  • Supervisors need confidence that effort to promote stability reciprocated elsewhere.
  • National authorities impose local requirements on domestic entities of foreign firms.
  • Instead, high global standards should create trust from transparent implementation.
  • Intensive supervisory cooperation leads to system of equivalence. mutual deference.
  • Working Together
  • G20 members will be positioned to defer to other’s comparable regulatory outcomes.
  • With commitment to common minimum standard and open supervisory co-operation.
  • Reinforce by using independent peer review, and an independent dispute resolution.
  • Brexit will test cooperation, as UK and EU have the same rules and high cooperation.
  • Markets are integrated, potential to create a template for trade in financial services.

Regulators BoE; FSB; UK FCA; UK PRA
Entity Types B/D; Bank; IA; Ins
Reference Sp, PR, SMR, Brexit
Functions Compliance; C-Suite; Financial; Legal; Registration; Reporting; Risk; Treasury
Countries Global Regulator; United Kingdom
Products Banking; Corporate; Derivatives; Fund Mgt; Insurance; Securities
Regions Global
Rule Type Guidance
Rule Date 4/20/2017
Effective Date 4/20/2017
Rule Id 31941
Linked to Rule :31795
Report Issue 5/1/2017
Report Section International

Last substantive update on 04/20/2017