The G-20 finance-ministerial summit released an array of documents today, most importantly from a financial-regulatory perspective the FSB’s official update of the agenda to be presented to heads of state in November. FSB head and Bank of England Governor Mark Carney emphasized that efforts at the FSB to set global gone-concern and total loss-absorption capacity will result in flexible proposals designed to end TBTF without violating national-banking prerogatives. As a result, the U.S. may well be yet again an out-lier in setting more stringent standards for its G-SIBs. Mr. Carney was strongly supportive of efforts to resolve cross-default clauses, but said these may not be concluded in time for the summit and laid out an array of formidable concerns yet to be resolved. As a result, despite the FSB’s focus on ending TBTF, key planks for banks will not be completed – if at all in consistent fashion – until well into 2015. Non-bank resolution standards will be finalized shortly for financial-market infrastructure, with G-SIIs also about to be subject to new capital standards designed to include a layer of bail-in debt or equity. SIFI designations for asset managers and broker-dealers may also advance, Mr. Carney said. Perhaps reflecting this, as well as increasing shifts in financial markets due to all the rules imposed since the crisis on banks, Mr. Carney also said the FSB will accompany efforts to complete the resolution framework with a new focus on emerging risks. These are not, however, detailed, although the FSB is in the near term trying to assess counterparty exposures related to derivatives. This report assesses key details in his report.
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