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Welcome /  Blog /  2019-05-doc6 Too-Big-To-Fail reforms to be evaluated

2019-05-doc6 Too-Big-To-Fail reforms to be evaluated

Last week, the Financial Stability Board (FSB) announced it is seeking feedback from stakeholders as part of its evaluation of the effects of the too-big-to-fail (TBTF) reforms for banks that were agreed by the G20 in the aftermath of the global financial crisis. The evaluation aims to assess whether the implemented reforms are indeed reducing the systemic and moral hazard risks associated with systemically important banks (SIBs). A second aim is to examine the broader effects of the reforms to address TBTF for SIBs on the overall functioning of the financial system. The G20 launched a comprehensive programme of financial reforms to increase the resilience of the global financial system, while preserving its open and integrated structure. With the post-crisis reforms nearly complete and their implementation well under way, the FSB's position is that an analysis of the effects of these reforms is becoming possible. To that end, the FSB published in July 2017 a framework for the post-implementation evaluation of the effects of the G20 financial regulatory reforms. For the feedback on the May 2019 announcement a working group has been set up, chaired by Claudia Buch (Vice-President Deutsche Bundesbank). The feedback more particularly addresses the following issues:
1. To what extent are TBTF reforms achieving their objectives as described in the terms of reference? Are they reducing the systemic and moral hazard risks associated with SIBs? Are they enhancing the ability of authorities to resolve systemic banks in an orderly manner and without exposing taxpayers to loss, while maintaining continuity of their economic functions? What evidence can be cited in support of your assessment?
2. Which types of TBTF policies (e.g. higher loss absorbency, more intensive supervision, resolution and resolvability, other) have had an impact on SIBs and how? What evidence can be cited in support of your assessment?
3. Is there any evidence that the effects of these reforms differ by type of bank (e.g. global vs domestic SIBs)? If so, what might explain these differences?
4. What have been the broader effects of these reforms on financial system resilience and structure, the functioning of financial markets, global financial integration, or the cost and availability of financing? What evidence can be cited in support of your assessment?
5. Have there been any material unintended consequences from the implementation of these reforms to date? What evidence is available to substantiate this?
6. Are there other issues relating to the effects of TBTF reforms that are not covered in the questions above and on which you would like to provide your views? Please substantiate your comments with evidence.
Feedback, including evidence in support of the responses, is to be submitted by 21 June 2019 to fsb@fsb.org under the subject heading “TBTF evaluation”. Provided responses will be published on the FSB’s website (www.fsb.org) unless respondents expressly request otherwise. The feedback (expeced in 4 weeks) will be considered by the FSB as it prepares the draft report, which will be issued for public consultation in June 2020. The final report will be published in some 18 months from now, late 2020.