14 October 2011

GFMA statement in advance of G20 Finance Ministers' meeting

"This weekend, G20 Finance Ministers gather at a pivotal moment for the global economy with the continuing sovereign debt crisis in Europe and the United States and many other economies facing weak economic growth. In the shadow of these events, Financial Ministers will address issues that are of critical importance to global financial markets, and boosting economic growth and job creation.

Soon, the G20 will fully adopt the capital and liquidity standards laid out in the Basel III agreement. These heightened standards will have a significant impact on financial institutions and their ability to allocate capital and provide credit to businesses and consumers on a global basis. As we have previously expressed, institutions should carry sufficient capital on their balance sheets to safeguard themselves adequately against market disruptions, large scale asset depreciation, and broad financial crises. Requiring excessive regulatory capital, however, will limit the ability of financial institutions from facilitating capital formation to the commercial sector that, in turn, supports new investment critical to economic growth and job creation. We continue to stress that the G20 must not impose an unrealistic implementation timeline given the cumulative impact these new standards will have on financial institutions, and their ability to provide capital that fuels economic growth.

Additionally, we remain concerned over the Financial Stability Board’s proposal to impose an additional capital surcharge on those financial institutions that are deemed systemically significant. With the onset of heightened capital and liquidity requirements under Basel III and additional domestic requirements, such a surcharge would further hamper financial institutions' ability to lend and provide credit at a time of weakened global economic growth. We remain opposed to the surcharge, and urge the G20 not to adopt this proposal.

We continue to support the G20, and the FSB’s efforts to ensure all relevant jurisdictions have the capacity to resolve systemically important financial institutions without systemic disruption and without exposing the taxpayer to the risk of loss, within a reasonable timeframe. We continue to support the FSB in beginning efforts to assemble a single, comprehensive and cohesive package of policy measures to improve the capacity of authorities to resolve SIFIs within and across national borders.

We remain actively engaged with global regulatory and industry bodies to develop one common, global legal entity identifier system. The financial industry organised around a fundamental principle that the accurate and unambiguous identification of legal entities engaged in financial transactions is foundational and critically important towards the improved measurement and monitoring of system risk. After a long and comprehensive outreach and solicitation period, the industry through GFMA presented recommendations on solution providers to the global regulatory community. We believe these recommended providers together possess the strong scope, scale and experience necessary to make the LEI solution successful. Moving forward, we will continue to engage with industry leaders and regulators on a global basis to build consensus on this recommendation. We urge the G20 to publicly support these efforts as they progress.

Lastly, we urge the G20 and Finance Ministers to work to ensure consistency and coordination of new financial regulations across all jurisdictions. These efforts will avoid extraterritorial conflicts, market confusion and will protect against the potential for regulatory arbitrage across borders."

Press release

© GFMA