Systemically Important Banks in the Post-Crisis Era
The Global Response and 135 Countries' Responses
By James R. Barth, Chris Brummer, Tong Li, and Daniel E. Nolle
September 4, 2013
This white paper outlines how G-20 member countries have been working to regulate systemically important banks in an effort to stabilize the world economy. Strikingly, countries are more similar than different in the measures they have adopted for regulating and supervising such banks.
New data from the post-crisis regulation and supervision of systemically important banks by 135 countries are highlighted and summarized in the paper. All G-20 members, including the U.S., have pledged to change national laws and policies, as necessary, to keep their commitments.
G-20 members, consisting of 19 countries and the EU, account for 86% of world GDP and 90% of the world's finances. As global economic leaders, members will emphasize the stabilization of systemically important financial institutions (SIFIs) and, aided by the agent of the G-20, the Financial Stability Board will monitor the implementation of agreed-upon policies. By analyzing SIFIs on the global and domestic levels, this paper shows distinctions between the two by the level of systemic risk to financial systems. Because the most important among these firms have global operations, requirements for such G-SIFIs cannot be effectively implemented at the national level.
"With the G-20 taking over the G-7 as the most powerful global economic and financial policy-making forum, the financial system agenda will serve as a strict guideline for its members," said report co-author James Barth, Senior Finance Fellow at the Milken Institute. "The greatest progress to date in establishing workable regulatory financial standards by the G-20 has been in the area of banking, through the Basel Committee on Banking Supervision, including the Basel III bank capital standards."