FSB backs Obama proposals on banks’ size cut

23 January 2010

The proposals announced by the US yesterday are amongst the range of options and approaches under consideration, said the Financial Stability Board, welcoming the US initiative. The FSB's final recommendations are expected later this year.

“The proposals announced by the US yesterday are amongst the range of options and approaches under consideration by the Financial Stability Board in its work to address the moral hazard risks posed by too-big-to-fail institutions”, the Board said in a press release issued the day after the US President Obama announced further measures to cut the size and investment of US banks.

 

‘Banks will no longer be allowed to own, invest or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit unrelated to serving their customers’, US President Obama said yesterday (see article).

 

However, the FSB also said that “several other options” are also under consideration including measures on targeted capital, leverage, and liquidity requirements; improved supervisory approaches; simplification of firm structures; strengthened national and cross-border resolution frameworks; and changes to financial infrastructure that reduce contagion risks.

 

The FBS will release an interim report on June and its final recommendations in October this year.

 

Press release

 

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