Writing for the FT, Carney says that banks, in aggregate, are on track to meet Basel III requirements but that some lenders are struggling and regulators have more work ahead.
Our first priority is to finish increasing the resilience of the banking system. While globally systemically important banks are on course to meet new international Basel III requirements almost five years before deadline, having raised more than $500 billion of capital, these aggregates mask uneven progress. Some banks still require significant repair, which should proceed without delay. Where banking systems have rebuilt capital, access to credit in the real economy has returned.
Greater transparency, simplicity and consistency should prevent banks gaming the new system. But, to this end, supervisors need to make good the pledge by G20 leaders to agree the rest of Basel III, including the leverage ratio, and to tackle large differences in risk weights across banks. Financial institutions also need to improve risk disclosures further and setters of accounting standards have been asked to agree a common standard for loan impairment this year.
In addition, we are committed to ending too-big-to-fail. We have publicly identified globally systemic banks and insurers, and will subject them to higher capital requirements, more intensive supervision and credible resolution regimes.
There are signs institutions and markets are adjusting to the G20’s determination; authorities must keep going. Governments must introduce legislative reforms to make all systemically important companies resolvable: banks, shadow banks, insurance companies and market infrastructure. Jurisdictions must also empower supervisors to reach agreements for credible cross-border resolution plans.
We must ensure failing banks can be resolved or recapitalised while maintaining continuity of essential services. The FSB has been tasked with developing proposals, by the G20 Brisbane summit in 2014, on total loss-absorbing capacity for institutions, as well as simplifying corporate structures and operations...
The $600 trillion derivatives market is being reformed. Steps to boost transparency through platform-trading and trade-reporting requirements, along with minimum capital and margin requirements and the introduction of central counterparties, are essential. Regulators must find ways to cooperate to implement measures consistently across borders. That will be complemented by reforms, coordinated by the FSB, to interest rate benchmarks, such as Libor, which are used in many derivatives and have been subject to abuse.
Five years after the depths of the financial crisis, the G20 has made substantial progress. How we finish the job will do much to determine global prosperity. Yielding to calls for unilateral action to protect domestic systems would risk fragmenting the global system, slowing global growth and job creation.
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