GLOBAL financial DEVELOPMENT REPORT 2013
changes over time. For a discussion on credit rating agencies, see box 2.3. Much work at the FSB level has been devoted to filling information gaps. In 2009, the G-20 finance ministers and central bank governors endorsed recommendations to address information gaps identified by the FSB Secretariat and IMF staff. The FSB, in cooperation with the IMF and others, has launched a major initiative to fill existing information gaps (FSB and IMF 2010). To deal with the too-big-to-fail issue, the FSB has developed, in response to requests from G-20 leaders, a set of policies to address the systemic and moral hazard risks associated with systemically important financial institutions (SIFIs). 21 The policies—to be implemented from 2012, with full implementation from 2019—basically consist of the following:22 • A new international standard, titled “FSB Key Attributes of Effective Resolution Regimes,” setting out the responsibilities, instruments, and powers that national resolution regimes should have to enable authorities to resolve failing financial firms in an orderly manner and without exposing taxpayers to the risk of loss • Requirements for resolvability assessments and for recovery and resolution planning for global SIFIs, and for the development of institution-specific crossborder cooperation agreements so that home and host authorities of the global SIFIs are better prepared for dealing with crises and have clarity on how to cooperate in a crisis • Requirements for banks determined to be globally systemically important to have additional loss absorption capacity tailored to the impact of their failure, rising from 1.0 percent to 2.5 percent of riskweighted assets, to be met with common equity • More intensive and effective supervision of SIFIs, including through stronger supervisory mandates, resources, and powers, and higher supervisory expectations for risk management functions, data aggre-
t h e s t a t e a s r e g u l a t o r a n d s u p e r v i s o r 61
gation capabilities, risk governance, and internal controls The FSB, in coordination with the Basel Committee, has come up with a list of 29 banks considered global SIFIs. These banks will need to meet the resolution planning requirements by the end of 2012. National authorities may decide to extend these requirements to other institutions in their jurisdictions. The group of global SIFIs will be updated annually and published by the FSB each November. The methodology and data used by the FSB will be publicly available so that markets and institutions can replicate the authorities’ determination.23 The FSB acknowledged that consistent implementation will be critical to the effectiveness of these measures. Legislative changes will be required in many jurisdictions to implement the FSB Key Attributes of Effective Resolution Regimes and to strengthen supervisory mandates and capabilities. Other requirements will demand a high degree of cooperation among authorities, and firms will have to review and change their structures and operations. National Regulation and Supervision in Response to the Crisis24 What is the effect of the global regulatory reforms so far at the national level? The World Bank survey of bank regulation and supervision is useful in answering this question. The results from the survey underscore the evolutionary nature of the regulatory and supervisory changes at the national level. To illustrate this point, for the qualitative questions in the survey, 85 percent of yes or no responses were unchanged between 2007 and 2011. Similarly, most of the quantitative indicators showed relatively little overall movement throughout the crisis. This relatively slow evolution notwithstanding, the World Bank survey shows notable changes in individual countries in several areas. For example, in an attempt to respond to the crisis, countries introduced a