FSB 'lining up further regulations'

12 November 2010

International banking industry watchdog the Financial Stability Board (FSB) is poised to consider calling for additional regulations for large firms over the coming year, its president has revealed.

Speaking in a recent interview with Bloomberg, FSB chief Mario Draghi implied that the organisation will conduct further research into the ability of systematically important financial institutions (Sifis) to prevent a repeat of the 2008 economic crisis and subsequent recession.

The 63-year-old added that the FSB will expand its research to include financial enterprises outside of the banking sector and that it will seek "progressive enlargement" of what he described as the "regulatory perimeter".

"On the basis of quality and quantity of the indicators provided by the Basel committee … the FSB will identify together with national authorities the globally-active Sifis," he told the news provider.

Mr Draghi stressed the importance of increasing constraints on what he called the "shadow financial sector" - including hedge funds, securities brokers and money market funds - to ensure that further crises are avoided.

His comments came as world leaders prepare to discuss the issue at the latest G20 meeting in Seoul, where regulatory measures put forward by the FSB and the Basel Committee are expected to be reviewed and debated.

Attendees also appear set to rubber-stamp the FSB's proposals to triple the highest-quality capital which banks possess and Mr Draghi has already expressed optimism that the Sifi review process will be completed by the end of next year.

The BankItalia president praised the G20 for the progress it has made so far on strengthening the global financial sector's regulatory framework and hailed it as "the most important forum" for worldwide economic coordination.

Earlier this week, outgoing HSBC chief executive Stephen Green warned that the incoming Basel III rules on bank capital should be reconsidered to avoid damaging international trade.

By Gary Cooper

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