Carney warns the G20 of ‘reform fatigue’ dangers

BANK REGULATION

check on firms’ use of their own statistical models to measure asset risk that would drive up their capital requirements. The U.S. has long been skeptical of internal models.

“Our collective agreement on the remaining elements of Basel III is essential,” Carney wrote. “Completing this standard will protect the gains in global resilience, restore full confidence to the bank capital framework, give certainty to international banks, and help avoid measures that could balkanize international banking.”

The FSB will complete its guidance on so-called internal total loss-absorbing capacity by the G20’s Hamburg summit in July, Carney wrote. The measure is intended to provide “home and host authorities with confidence regarding the resolution of cross-border banks,” and to minimize “incentives to ringfence assets domestically which would fragment the financial system,” he wrote. Carney said that by the summit the FSB would also deliver an assessment of shadow banking and related financial-stability risks, report on reforms to over-the-counter derivatives markets, publish final guidance on the resolution of clearing houses and report on misconduct risks.

“A decade on from the start of the crisis, the G20 has made substantial progress in building a financial system that is more resilient and better able to fund households and business in sustainable way,” Carney wrote. “As the global recovery gains strength, now is not the time to risk these hard-won gains.”