Lobbyists for the financial industry called on policy makers to reinforce the Financial Stability Board’s role in spearheading efforts to stop the fragmentation of financial regulation in different countries.
Unilateral policies on the ring-fencing of capital and liquidity by individual nations are on the rise, Timothy Adams, managing director of the Institute of International Finance, said in a letter released by the group today. The letter was addressed to Anton Siluanov, the finance minister for Russia, which holds the rotating presidency for the Group of 20 nations whose central bankers and officials are represented in the FSB.
“If we fail to preserve the spirit -- and the fact -- of international harmonization of financial regulation, we run the risk of inhibiting the global economic regeneration so desperately needed by people everywhere,” Adams said in the letter, which was released by the IIF today. The IIF is a Washington-based lobby group that represents more than 470 financial institutions.
Different regimes have proposed their own ways of reining in banks in the wake of the financial crisis. The U.S. Volcker rule, the U.K.’s proposed Vickers rule and a European Union plan named after Bank of Finland Governor Erkki Liikanen all seek different ways of splitting riskier trading from other units. The Federal Reserve also proposed in December that two dozen foreign banks be subject to stricter U.S. capital rules to lower risks to the financial system.
End of Easing
The central role of the FSB in coordinating policy should be reinforced, the IIF said today. The FSB brings together regulators, government finance ministry officials and central bankers from the Group of 20, and is chaired by Mark Carney, the Bank of Canada governor who takes the helm of the Bank of England in July.
The IIF also urged nations to develop strategies to handle a reversal in monetary policy should central banks wind down asset purchases known as quantitative easing and start to interest rates. Central banks should work together to guide market expectations, aiming to avoid exchange-rate volatility that may result when easing ends, the IIF said.
The EU should “move decisively” towards creating a single supervisory mechanism under the European Central Bank, as well as creating common bank deposit insurance and a bank resolution framework, the IIF said.
“It is critical to maintain and augment” reform momentum in the EU, Adams wrote.