G20 and FSB split on scale of financial reform
21 January 2010
Risk.net: Jong-Goo Yi, Standing Commissioner of the Financial Services Commission for South Korea, believes disagreement between the two camps is likely to result in a "hard fought" battle, but he hopes the next G20 summit in Seoul will "give some concrete guidance on that".
"There are different schools of thought, even among the members of the FSB and Basel Committee," Jong-Goo Yi, Standing Commissioner of the Financial Services Commission for South Korea, told delegates attending the Asian Financial Forum in Hong Kong. "[One group believes the] loss-absorbing ability of banks has to be greatly improved. We recognise the importance of capital, but let's not forget to balance it appropriately against credit growth, particularly for growing and developing economies."
Policymakers are working on an aggressive series of reforms, including closer scrutiny of systemically important financial institutions, the beefing up of capital requirements and the introduction of capital buffers and leverage ratios, to ensure that the financial system is better insulated against shocks similar to those that sparked the ongoing global financial crisis.
"During the first half of this year, there will be a quantitative impact study taking into account various elements of new reform measures and how they will affect the overall balance sheet of banks," says Yi. "Then, during the second half, based on the quantitative impact study, there will be a calibration of various capital, including regulatory capital requirements, the leverage ratio and capital buffer."
Yi said that disagreement between the two camps is likely to result in a "hard fought" battle, but hopes the next G20 summit in Seoul in November will "give some concrete guidance on that".
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