Were Post-Crisis G20 Reforms Effective? FSB Says Mostly Yes

The Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system, has published its fourth annual report today ahead of the G20 Leaders’ Summit in Buenos Aires.

With more than a decade having past since the global financial crisis (GFC), the report takes a look at the implementation and effect of the post-GFC regulatory reforms of the G20 which were originally launched in 2009.

The G20’s reform program aimed to fix the fault lines that led to the GFC. Specifically, it has four core elements as outlined by the report: “making financial institutions more resilient; ending too-big-to-fail (TBTF); making derivatives markets safer; and enhancing resilience of non-bank financial intermediation.”

FSB conclusions - is the financial market stable?

The report is the result of the FSB moving away from designing new policy initiatives to ensuring the implementation and evaluation of these reforms. So, what did the FSB find in its evaluations?

The extensive report by the FSB can be found here for those wanting to see the in-depth analysis. However, overall, the FSB’s conclusions seem to be overly positive.

The international body found the global adoption of Basel III capital and Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term standards has “generally been timely.” There has been positive progress towards ending TBTF and putting in place the G20 commitments on the over-the-counter (OTC) derivatives markets.

As a whole, large international banks are “better capitalized, less leveraged and more liquid” and work has been done to address the risks associated with banks that are systematically important. Furthermore the OTC derivatives market, as a result of the measures, is now more transparent and simple, thanks in part to the use of central Clearing Clearing Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Read this Term.

FSB recommendations

While the outlook from the FSB is generally positive, we’re not out of the woods just yet, with the body stating that: “cross-jurisdictional cooperation is critical as memories of the crisis fade.”

“Strong common standards and close cooperation help avoid market fragmentation and provide the basis on which to build open and integrated financial markets,” the FSB continued. This is particularly important as the effects of new technology continue to evolve the financial system, it added.