Full, timely and global implementation of Basel III and other reforms is essential for strengthening the financial system. Responsibility for Basel III does not rest only with the regulatory community. Bank boards, senior management and risk managers all have a clear role in adapting to the new framework. Auditors also play a key part in providing independent and disciplined review and feedback on management's efforts. But regulation is only part of the broader public policy agenda. There is need to continue with the finalisation and implementation of regulatory reform.
There are high expectations from all parties involved in the process, including the G20 and the general public. To achieve the stated objectives of the reform, sufficient resources will be needed on the part of banks, supervisors and auditors.
This effort is necessary as another crisis could turn out worse; there is no alternative to strengthening the system. And that will only be possible if implementation of Basel III and other reforms is global, full and consistent.
But Basel III is only part of the new regulation for which there is aim for. Completion of the regulatory agenda, and in particular the further FSB-led work on SIFIs (e.g. non-bank
G-SIFIs and domestic SIFIs), resolution regimes, OTC derivatives and CCPs, and shadow banking is required.
Regulation was only part of the problem and is therefore only part of the solution. It is an important part and there is need to continue with the finalisation and implementation of regulatory reform. Safeguarding financial stability, however, requires action in all areas of public policy - including fiscal, monetary and macro-prudential measures. These policies need to take a long-term view and to internalise systemic risk better.
And, lastly, various institutional reforms and private sector reforms are essential if confidence in the financial system is to be restored. The private sector also has a vital part to play in building a more resilient financial system.
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