Global efforts to rein in the over-the-counter derivatives market are being threatened by worrisome delays and divergent approaches, an international policy-coordinating panel said on Friday.
The Swiss-based Financial Stability Board (FSB) said it was "concerned" that many members of the Group of 20 wealthy nations may not meet an end-2012 deadline to tighten oversight of the $600 trillion OTC market for derivatives such as swaps.
"In order for this target to be achieved, jurisdictions need to take substantial, concrete steps toward implementation immediately," the FSB said in a progress report on financial regulation reforms worldwide.
The report came out at the end of a G20 finance ministers meeting held in conjunction with the spring meetings of the International Monetary Fund and the World Bank.
The G20 nations have agreed to make the OTC derivatives market more open and accountable. The market amplified the 2007-2009 financial crisis that shook world banks and dragged the U.S. economy into a deep recession.
The FSB cited concerns about differences in approach to derivatives among jurisdictions "that could weaken the effectiveness of reforms in these markets, create potential opportunities for regulatory arbitrage, or subject market participants and infrastructures to conflicting regulatory requirements."
At the G20 level, goals include more standardization, central clearing, exchange or electronic platform trading, and reporting of transactions to trade repositories.
"Major implementation projects are under way in the largest OTC derivatives markets," the FSB report said. "Nevertheless, although implementation is still in its early stages, the FSB is concerned that many jurisdictions may not meet the end-2012 deadline."
In a related matter, the FSB said G20 members in January 2013 will begin to phase in the Basel III bank capital accords, with full implementation by January 2019.
Another G20 objective is to require international banks to increase their capital cushions to protect against potential future losses. Inadequate bank capital and excessive leverage also contributed to the financial crisis, the worst to hit the world financial system since the 1930s.
Issues about the levels of new liquidity requirements for big banks are being examined, the report said, mentioning that there could be "adjustments ... based on additional information and rigorous analyses."
The report said more information will be available in mid-2011 on a G20 effort to require the world's largest financial institutions to have "higher loss absorbency capacity to reflect the greater risks that these firms pose to the global financial system."
The report also said that draft proposals on national and cross-border regimes for resolving troubled firms will be discussed at an FSB plenary meeting in July. Improved resolution systems are another goal, intended to prevent more taxpayer bailouts of distressed institutions.
Source: http://www.reuters.com
The Swiss-based Financial Stability Board (FSB) said it was "concerned" that many members of the Group of 20 wealthy nations may not meet an end-2012 deadline to tighten oversight of the $600 trillion OTC market for derivatives such as swaps.
"In order for this target to be achieved, jurisdictions need to take substantial, concrete steps toward implementation immediately," the FSB said in a progress report on financial regulation reforms worldwide.
The report came out at the end of a G20 finance ministers meeting held in conjunction with the spring meetings of the International Monetary Fund and the World Bank.
The G20 nations have agreed to make the OTC derivatives market more open and accountable. The market amplified the 2007-2009 financial crisis that shook world banks and dragged the U.S. economy into a deep recession.
The FSB cited concerns about differences in approach to derivatives among jurisdictions "that could weaken the effectiveness of reforms in these markets, create potential opportunities for regulatory arbitrage, or subject market participants and infrastructures to conflicting regulatory requirements."
At the G20 level, goals include more standardization, central clearing, exchange or electronic platform trading, and reporting of transactions to trade repositories.
"Major implementation projects are under way in the largest OTC derivatives markets," the FSB report said. "Nevertheless, although implementation is still in its early stages, the FSB is concerned that many jurisdictions may not meet the end-2012 deadline."
In a related matter, the FSB said G20 members in January 2013 will begin to phase in the Basel III bank capital accords, with full implementation by January 2019.
Another G20 objective is to require international banks to increase their capital cushions to protect against potential future losses. Inadequate bank capital and excessive leverage also contributed to the financial crisis, the worst to hit the world financial system since the 1930s.
Issues about the levels of new liquidity requirements for big banks are being examined, the report said, mentioning that there could be "adjustments ... based on additional information and rigorous analyses."
The report said more information will be available in mid-2011 on a G20 effort to require the world's largest financial institutions to have "higher loss absorbency capacity to reflect the greater risks that these firms pose to the global financial system."
The report also said that draft proposals on national and cross-border regimes for resolving troubled firms will be discussed at an FSB plenary meeting in July. Improved resolution systems are another goal, intended to prevent more taxpayer bailouts of distressed institutions.
Source: http://www.reuters.com
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