GFMA and AFME Briefing Note: Global Systemically Important Financial Institutions

5 March 2012

GFMA with their European affiliate, the Association for Financial Markets in Europe (AFME),  authored a briefing note on Global Systemically Important Financial Institutions.

Introduction 

Global Systemically Important Financial Institutions, or G-SIFIs, have become an area of focus for international policymakers.  The G20 is driving the development of a new regulatory framework at a political level and has tasked various agencies with creating more detailed approaches.  The concern of policymakers is that G-SIFIs are too-big-to-fail, potentially forcing taxpayers to bear the costs of any failures.           

The policy framework for banks classified as G-SIFIs (known as Global Systemically Important Banks, or G-SIBs) has been developed more quickly than for other parts of the financial sector.  The initial list of G-SIBs has been published (see box below) using a methodology developed by the Basel Committee (BCBS).  These banks face new capital requirements and are required to develop resolution plans, while the Financial Stability Board (FSB) has consulted on an enhanced data template for G-SIBs.

While the Global Financial Market Association (GFMA), of which AFME is a member, strongly supports the goal of the Basel Committee to promote financial stability, GFMA has a number of concerns with the proposed G-SIB capital buffers including: whether the benefits exceed the cost of reduced economic growth, the lack of clear and well-defined offsets against the capital buffers for improved resolution regimes, and transparency and methodological issues.

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