LONDON (Reuters) – Reforms to the global financial system following the banking crisis of a decade ago have reduced the risk that taxpayers will have to bail out lenders again, but some gaps have yet to be closed, the Board of Directors said Sunday. Financial Stability (FSB).
FILE PHOTO: Office blocks of Citi, Barclays and HSBC banks seen at sunset in Canary Wharf financial district in London, Great Britain, November 16, 2017. REUTERS / Toby Melville
After the crisis, the FSB, which coordinates regulation for the Group of 20 Rich and Emerging Economies (G20), introduced rules that require the world’s largest banks, such as Goldman Sachs, HSBC and Deutsche Bank, to issue special debt. that can be amortized in a collapse of the markets.
This and other reforms sought to prevent banks from being “too big to fail,” when governments are going to bail them out if they find themselves in serious trouble.
Bundesbank Vice President Claudia Buch, who chaired an FSB evaluation of whether the new rules decreased the likelihood that taxpayers will have to bail out banks, said the reforms appear to be working, but there is still work to do.
“The FSB encourages the full implementation of the resolution reforms. Supervisors … have much better information now, but there is still room for improvement in reporting and disclosures, “he told reporters in a media call.
Financing costs for banks have increased, reflecting that banks are more likely to pay off special debt rather than being rescued by taxpayers, according to the evaluation.
He estimated that the gross benefits of the reforms would total $ 216 billion to exceed the gross costs of $ 65 billion.
But there may be gaps in the information available to assess whether the reforms work, such as who owns the debt for regulators to assess the potential impact of a bailout on the financial system, he said.
Under the reforms, only three systemically important banks have been “resolved” in recent years, or have been liquidated without disruption to the overall financial system, according to the assessment.
Some countries like Italy have continued to use public money to help smaller banks, examples described by regulators as idiosyncratic and that do not undermine the momentum of reforms too big to fail.
Report by Huw Jones; Edited by Frances Kerry
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