With Congressional oversight of SIFI designations increasing, especially the role of the Financial Stability Board, a leading global regulator said that an imperative condition precedent to ending
too big to fail is the identification of all systemically important financial
firms and subjecting them to higher standards of resilience. Mark Carney,
Bank of England Governor and Chair of the Financial Stability Board, added that policy
makers and regulators must also develop a range of tools to ensure that, if
they do fail, the firms can be resolved without severe disruption to the
financial system and without exposing the taxpayer to loss.
In recent remarks,
the central banker and FSB chief noted that the G20 leaders have endorsed
measures to end too-big-to-fail. In response, the Financial Stability Board has
developed methodologies and begun to identify systemically important financial institutions.
This is the year to complete that job, emphasized the Chair. Governments must
introduce legislative reforms to make all systemically important companies resolvable.
The FSB is developing proposals, for the G20 summit in Brisbane, on total loss
absorbing capacity for financial institutions, so that private creditors stand
in front of taxpayers when banks fail. In addition, the FSB is working with
industry to change derivative contracts so that all counterparties stay in
while the resolution of a failing firm is underway.
It is absolutely imperative and integral to the
financial markets for policy makers and regulators to end too big to fail, averred
Mr. Carney, adding that the most severe blow to public trust during the
financial crisis was the revelation that there were scores of too-big-to-fail
institutions operating at the heart of finance. That unjust sharing of risk and
reward contributed directly to inequality, he noted, but, more importantly, it has had a corrosive effect on the broader
social fabric of which finance is part and on which it relies.