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Email News Service June 2012: G20 summit to contend with regulatory issues as well as eurozone crisis |
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LONDON, June 18 (Global Risk Regulator) – World leaders meeting for their two-day summit starting today in Los Cabos, Mexico, will be reviewing problems with the implementation of the Basel III banking reforms at a gathering that, once again, will be dominated by the eurozone crisis. 
At their summit, leaders of the Group of Twenty (G20) biggest economies, relieved that pro-bailout parties won a narrow election victory in Greece over the weekend, are expected to pile pressure on Europe to outline a lasting strategy to save the euro currency and end financial turmoil. But the leaders will also be updated by the Financial Stability Board (FSB) on progress with the wide-ranging reforms of the global financial system that the G20 instigated in the wake of the 2007-09 financial crisis. They will also hear recommendations on how to strengthen the capacity and governance of the FSB, the body of national and international officials that has the crucial role of coordinating implementation of the G20 reforms.
The picture is patchy on progress. Last week the Basel Committee of global banking supervisors, which sets regulatory standards for international banking, reported that implementation of the tough Basel III bank capital and liquidity rules could be weaker in the US, Europe and Japan than the globally-agreed standards in some areas. Noting that seven countries, including the US, out of the Basel Committee’s 27-nation membership had yet to issue draft Basel III regulations, the Committee said several countries could face a significant challenge in meeting the January 2013 deadline for starting the implementation process. (The US recently issued for comment a notice of proposed rulemaking, or NPR, that would bring Basel III into effect).
However, the FSB reported on Friday that the world's top derivatives markets are making good progress in implementing tougher rules for the $700 trillion sector but much still needs to be done if the end-2012 deadline for introducing the rules is to be met. Meanwhile, efforts to create a single set of global accounting rules – a single accounting language that can be understood worldwide – continue to flounder with growing doubts that the US will ever submit to a non-US authority setting accounting standards for American firms.
The G20 leaders will also be considering a proposal from the International Association of Insurance Supervisors (IAIS) on a methodology for assessing whether an insurance company falls into the global systemically important financial institution (G-SIFI) category. The IAIS proposal parallels the work of global banking regulators who’ve already named 29 big international banks as being in the G-SIFI category and therefore liable to capital surcharges.
The summit will also be looking at an FSB plan for launching by March 2013 a world-wide Legal Entity Identifier system for tagging financial trades.
(Additional reporting: Reuters)
David Keefe (dkeefe@globalriskregulator.com)
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