BIS: The need for effective international collaboration in times of financial stress

20 January 2012

Collaboration between financial authorities has never been so testing and important. We face key coordination challenges in the area of financial regulation, with respect to the consistency of the calculations of risk-weighted assets, the treatment of sovereign exposures, and liquidity standards.

Mr Jaime Caruana, General Manager of the BIS, gave a speech at the seminar on "Long-term growth: organising the stability and attractiveness of European financial markets", in Berlin on 20 January, 2012.

"Some like to point out that Basel II was never implemented worldwide, and why should it be any different for Basel III. So what are the grounds for optimism?

First, a good number of regions have complemented Basel III's new macro-prudential features by setting up key institutions to ensure that the internationally-agreed regulations are effectively implemented. The EU has inaugurated the European Systemic Risk Board as the independent body responsible for the macro-prudential oversight of the region's financial system. In the United States, the Financial Stability Oversight Council is tasked with monitoring the US financial system to ensure its stability. And several other countries have recently moved to set up similar institutions, especially in a number of emerging market economies.

Moreover, there are three new elements at the international level that will support adequate collaboration:

• first, international agreements to set up minimum standards are supported by a higher level of political commitment, through the G20 process;
• second, the commitment for coordination on the regulatory agenda is endorsed by all the financial authorities represented at the FSB level and is supported by peer review processes;
• most important is the peer review process organised at the Basel Committee level to analyse how the Basel Framework will be implemented. Again, transparency will be a very important element as the results of this analysis will be published. The aim is to work on three levels to ensure that: Basel III is adopted in a timely fashion (level 1); that domestic regulations are framed in accord with Basel III (level 2); and that the outcome of capital calculations is globally consistent (level 3).

Full speech

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