Late Tuesday night, the G-20 issued a hard-fought communiqué outlining the agreements reached on the Eurozone crisis – such as they were. In this report, FedFin assesses G-20 actions on financial regulation which, while second fiddle to the ongoing Euro debacle, are significant changes to the increasingly stringent fabric of global financial standards. As anticipated, the G-20 backed plans to make the Financial Stability Board an authoritative body instead of the advisory one to date it has been for the Basel Committee, International Association of Insurance Supervisors and International Organization of Securities Commissions. Reflecting this newfound clout, the FSB pressured the IAIS to accelerate its work on designating global systemically-important insurers (see FSM Report INSURANCE30), with new, faster deadlines here endorsed by the G-20. The FSB has now also been able to push IOSCO to focus on designating other systemic nonbanks, and FedFin expects shortly to see a consultative paper addressing hedge funds, MMFs and similar entities in the securities arena. The most serious behind-the-scene battle on financial regulation at Los Cabos was over the impact of all of the Basel rules on emerging nations. The FSB conceded by issuing a report outlining possible unintended consequences on which the G-20 pledged more work even as heads of state and the FSB stood firm on the overall global framework. The summit occurred as the Basel Committee met in Switzerland, taking action on new rules for domestic systemic banks and central counterparties FedFin will assess in forthcoming client reports.
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