G20 up close: Thinking locally, acting globally

​​​​​BRUSSELS, 9 March 2017 – The following text is from the WSBI G20 Institutional Positions document​ released this week.​


Financial markets/International financial architecture

 

Appropriate regulation for better economic growth

Two messages in the Communiqué under the 2016 G20 Chinese Presidency are especially needed: (i) no significant increase of capital requirements should take place and (ii) a level playing field, in particular between different jurisdictions needs to be preserved and promoted. WSBI welcomes that the G20 German Presidency continues the G20 Chinese Presidency's initiative to further strengthen the international financial architecture and global financial safety net.

Past reforms on capital, liquidity, loss absorption, etc. have powerfully fostered financial stability all over the world. Now, when economic figures are showing some growth rates, it would be wise to let the economy grow instead of prescribing even stricter requirements to be complied with. In this respect, there is need for a pause on banking regulatory reforms at international level – and to re-calibrate those that might have unintended effects – in order to focus more on fostering economic growth. For example, the capability of banks to fund the real economy has been restricted by the new regulations under Basel III.

Locally focused banks who make up WSBI membership, who are strong building block of national financial system in particular in the time of financial crisis, should not be hurt by ongoing financial rules reform, but should thrive within an innovation-driven, proportionate framework.

Pressing need for impact assessment and proportionate legislation

​Many measures were adopted in difficult circumstances in the aftermath of the financial crisis within a short period of time. Unintended consequences, not striking the right balance between mitigating risk and fostering growth, occurred. Given the wave of new legislation, there is pressing need for an assessment by policymakers of the appropriateness of banking rules already on the books. Furthermore, before initiating new regulatory acts, it is especially important to carry out detailed impact assessments that also take into account the impacts on smaller and less complex banks as well as the interactions between different regulatory pieces.

The Principle of Proportionality should be weaved into all aspects of regulation. There is need for it to be recognised and applied at every step of the legislative and regulatory process so that existing and new legislation and regulations are applied to banks in a proportionate way. If not applied, costs of disproportionate regulation are likely to be substantial. Disproportionate regulation may force banks, in particular locally focused retail banks, to pare down lending activity as they become unnecessarily more risk averse.

Thinking locally, acting globally

As the G20's ongoing work continues on better monitoring and regulation of international financial markets and on setting international standards, it is critical that global policies and guidelines should be tailored and adapted at regional and national level. By doing this, those policies and guidelines will best fit market realities, as each jurisdiction has its own specificities as far as financial market structures, business culture and activities.


​>> Explore: WSBI institutional positions to G20 German presidency

>> Learn about related conference


G20; Proportionality; Basel III