FRANKFURT (dpa-AFX) – Banking supervisors and regulators believe that despite great progress, they are not yet at the end of their efforts to reduce risks in the global financial system. Bundesbank Vice President Claudia Buch summarized that the reforms launched after the 2008/2009 financial crisis had made major banks more resilient and given the authorities more options for dealing with shocks.
However, in an evaluation of the “Too big to fail” reforms published on Sunday, the Financial Stability Board (FSB) came to the same conclusion that there are still gaps in the monitoring of systemically important large banks. So there are still obstacles to the processing of institutions. In addition, while regulators, companies and markets have much better information than before the reforms were implemented, reporting and disclosure could still be improved.
Numerous international financial institutions are so large and so networked around the world that their downfall could endanger the entire financial system. Before the financial crisis, investors often assumed that such banks would not be able to leave the market because the state would support them with tax billions if necessary. These institutes were considered too big to fail.
Dealing with large banks has been a central issue for regulators and supervisors since the expensive experiences of the financial crisis. Because if possible, it should be avoided that, as was the case a good ten years ago, states and taxpayers should step in in the event of a problem.
For this reason, banks have since been obliged, among other things, to maintain thicker equity buffers for times of crisis. The rule also applies that owners and creditors of the banks are primarily asked to pay in the event of a necessary rescue.
The Financial Stability Board should identify weaknesses in the international financial system, make proposals for their elimination and monitor their implementation. Members of the FSB are central banks, finance ministries and supervisory authorities from the leading economic nations (G20) as well as from Hong Kong, the Netherlands, Spain, Singapore and Switzerland, as well as the European Central Bank (ECB) and the EU Commission./ben/DP/zb
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