G-7 Leaders Stick to Deadline for FSB Too-Big-to-Fail Fix

Leaders of the Group of Seven nations said they’ll push ahead with reforms aimed at preventing government bailouts of big banks once impact assessments of the rules are completed.

The Financial Stability Board’s proposal on total loss absorbing capacity, or TLAC, would be used to “address the ‘too-big-to-fail’ problem on a global level,” the leaders said in a joint statement on June 8 following a meeting in Germany.

The FSB’s proposal, made last year, would require the biggest banks to issue ordinary shares, subordinated debt and other loss-absorbing securities equivalent to as much as a fifth of their assets weighted for risk. Bank of England Governor Mark Carney, who heads the FSB, has ruled out sweeping changes to TLAC, saying in March that the final rules will be “very similar” to last year’s draft. The regulations would take effect at the earliest in 2019.

“We remain committed to finalizing the proposed common international standard on total loss absorbing capacity for global systemically important banks by November, following the completion of rigorous and comprehensive impact assessments,” the G-7 leaders said.

The group also called on regulators to work together across jurisdictions on bank resolution and derivatives rules as well as calling for more work to be done in the area of shadow banking.

“Timely and comprehensive implementation of the agreed G-20 shadow banking road map is essential,” they said.

The G-7 leaders said they’ll monitor risks to the financial system from “market-based finance” and market volatility.

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