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G20 up close: Financial regulation

G20 up close: Financial regulation

​More effective and efficient governance: building resilient financial institutions

>> See the WSBI Intitutional Positions for G20 decision makers (.pdf)

​​​​BRUSSELS, 18 July 2016 – In the recently released WSBI position paper to G20 decision makers, it welcomes the G20 Chinese Presidency objective of more effective and efficient global economic and financial governance and that the G20 should continue to play a role to keep the momentum of reform.

As regards continuing financial sector reform, WSBI agrees on the overall principle that the G20 needs to continue these reforms in order to implement standards already agreed upon and to further the work on setting standards. In this respect it does, however, have a number of concerns that it would like to highlight as summarised below:

  • At this moment in time, it appears clear that the implementation of the Basel III framework still contains a number of matters that ought to be properly calibrated through regulation. In particular, WSBI does not see the necessity of applying the NSFR ratio, for it would delay macroeconomic recovery and create further liquidity shortages.
  • Considering the strengthening of national financial regulation, WSBI believes that the requirements for the leverage ratio should not deflect the ratio from its initial purpose as a simple backstop within the Basel III rulebook. Due to its lack of risk weights, WSBI calls for the leverage ratio to be limited to a maximum of 3% and applied only at a group consolidated level so as to avoid an excessive overburden for smaller financial entities, and thus penalising local communities. On RWA (risk-weighted assets), in particular regarding IRB (internal ratings-based) models, the design of the models must be respected, and should not be subject to add-ons based on unquantifiable supervisory judgments.

Green finance

WSBI acknowledges that global developments regarding green finance and the fight against climate change have an impact on the local banking model of its members, and has even developed guidance in this respect. WSBI members are thus active and work towards identifying ways of adapting themselves and contributing to global, regional and national debates in the numerous issues that the subject of green finance and fight against climate change encompass: integration of environmental risks as systemic risks for banks and their stability, non-financial disclosure, green bonds, climate stress tests, energy efficiency, etc.

Improving international tax regime

WSBI members support the on-going worldwide initiatives to address tax avoidance and evasion. We believe that it is imperative to have one system for multilateral automatic exchange of information (AEOI). WSBI therefore calls for the different institutions involved to consider the enormous reporting requirements placed on individual institutions and to coordinate the request for information so as to ensure global standardisation.

G20; Basel III; Capital Requirements Directive and Regulation; Leverage ratio