* Big banks get more time to write "living wills"
* G20 sets deadline to reduce reliance on credit ratings
* New "shadow banks" rules ready by Sept. 2013
MEXICO CITY/LONDON, Nov 5 International
watchdogs, working to tighten-up global regulation after the
financial crisis, are moving ahead with plans to extend their
reach to "shadow banks" such as money-market funds that handle
trillions of dollars in short-term investments.
Policymakers have already tightened regulation for
mainstream banks but are keen to stop higher-risk activities
shifting to less supervised areas such as off-balance sheet
units, hedge funds and money-market funds, which contributed to
This is a clear signal there will be no let up for the
financial sector despite warnings that introducing too many
rules could hinder global economic recovery.
The Financial Stability Board (FSB), a task force from the
world's top 20 economies (G20), told the group's finance
ministers gathered in Mexico on Monday the new rules for what
some also call "parallel" banks would be ready in September.
"The approach is designed to be proportionate to financial
stability risks," FSB Chairman Mark Carney wrote to G20 finance
ministers. He said the aim was to focus on activities that were
material to the financial system and to make use of lessons from
the last crisis.
He wants to reduce the susceptibility of money market funds
to "runs" as seen in the early part of 2007-2009. The FSB will
publish draft rules for consultation shortly.
The FSB is struggling to keep on track implementation of a
whole series of rules already agreed by the G20 and some
deadlines are slipping.
"The key determinant of the effectiveness of reforms is
whether they are implemented in a timely, consistent and
complete manner," Carney said.
For example, the world's top 28 banks will get another six
months to June 2013 to show how they can be wound down in a
crisis without wreaking the havoc caused by the collapse of
Lehman Brothers in 2008.
This delay was due to "uneven headway" made so far,
highlighting the difficulties regulators face in following
through on pledges the G20 made in the aftermath of Lehman.
Also, the United States and European Union are set to miss a
January deadline to implement new bank capital rules - known as
Basel III, the G20's main response to the financial crisis.
Progress is also slow on cutting the financial sector's
reliance on credit ratings for investment decisions or for
calculating how much capital banks should hold.
As a result, the FSB has tried to speed things up by telling
global banking regulators to identify proposals by the end of
this year to trim the use of ratings and implement them by
January 2016. National supervisors must implement alternatives
to ratings by the end of 2015.
The G20 is still trying to stop banks becoming "too big to
fail", which covers banks the markets believe would be bailed
out in a crisis.
Carney, also governor of the Bank of Canada, suggested that
G20 ministers could request a full assessment next September on
whether further action was needed on this issue.
The FSB also set out a timetable for extra scrutiny of
second tier banks and big insurers.
Important domestic banks will have to hold more capital from
2016, if required by regulators, while insurers deemed to be
"systemically important" in 2017 will have to hold extra capital