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International Association for the

Study of Insurance Economics

Études et Dossiers

Extract from

Études et Dossiers No. 384

8

th

Insurance and Finance Seminar

of The Geneva Association

7-8 December 2011

London

&

Presentations on The Geneva Association’s

Financial Stability in Insurance Initiative

February 2012

Working Paper Series of

The Geneva Association

© Association Internationale pour l'Etude de l'Economie de l'Assurance

The Geneva Association - General Secretariat - 53, route de Malagnou - CH-1208 Geneva

Tel.: +41-22-707 66 00 - Fax: +41-22-736 75 36 - secretariat@genevaassociation.org - www.genevaassociation.org

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The Geneva Association Working Paper Series “Études et Dossiers” appear at irregular

intervals about 10–12 times per year. Distribution is limited.

The “Études et Dossiers” are the working paper series of The Geneva Association. These

documents present intermediary or final results of conference proceedings, special reports and

research done by The Geneva Association. Where they contain work in progress or summaries

of conference presentations, the material must not be cited without the express consent of the

author in question.

The opinions expressed in Geneva Association newsletters and publications are the

responsibility of the authors. We therefore disclaim all liability and responsibility arising from

such materials by any third parties.

This document is free to download from The Geneva Association website, please visit:

www.genevaassociation.org.

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The Geneva Association________________________Etudes et Dossiers no. 384

6-1

The FSB SIFI Framework

Grace Sone

Mandate of the Financial Stability Board (FSB)

• Assess vulnerabilities affecting the financial system and identify and oversee action needed to address them;

• Promote coordination and information exchange among authorities responsible for • Promote coordination and information exchange among authorities responsible for

financial stability;

• Monitor and advise on market developments and their implications for regulatory policy; • Advise on and monitor best practice in meeting regulatory standards;

• Undertake joint strategic reviews of the policy development work of the international standard setting bodies to ensure their work is timely, coordinated, focused on priorities, and addressing gaps;

• Set guidelines for and support the establishment of supervisory colleges;Set guidelines for and support the establishment of supervisory colleges;

• Manage contingency planning for cross-border crisis management, particularly with respect to systemically important firms; and

• Collaborate with the IMF to conduct Early Warning Exercises.

Source: FSB website (http://www.financialstabilityboard.org/about/mandate.htm/) 2

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The FSB’s financial reform agenda in 2010-11

• Implementation of reforms to bank capital and liquidity standards (Basel II/III);

• Strengthening the regulation and oversight of the shadow banking system;

• Improving the OTC and commodities derivatives markets; • Improving the OTC and commodities derivatives markets;

• Addressing systemically important financial institutions (SIFIs); - Global SIFI (G-SIFI) determination and loss absorbency - Resolution tools and regimes

- Supervisory intensity and effectiveness

• Developing macroprudential frameworks and tools; • Convergence on the strengthened accounting standards; g g g

• Strengthening adherence to international supervisory and regulatory standards; • Reforming compensation practices to support financial stability;

• Financial stability and regulatory issues in emerging and developing countries • Enhancing consumer protection etc.

Source: The G20 Seoul Summit Document (http://www.g20.org/Documents2010/11/seoulsummit_declaration.pdf/) 3

-The structure of the shadow banking system

Facilitation of Maturity/Liquidity Transformation ‘Credit Intermediation Chain’ Facilitation of Maturity/Liquidity Transformation ‘Credit Intermediation Chain’

Shadow banking can be composed of a single entity or involve multiple entities forming a chain of credit intermediation.

Banks, Insurance Companies etc.

Rating assignment Loan Origination Loan Warehousing • Commercial banks • Mortgage finance companies • Consumer finance companies

etc. • ABCP conduits (single-seller) • ABCP conduits (multi-seller) • SPVs etc. • SIVs Explicit/Implicit support (Liquidity Facilities, Credit Enhancements) Banks, Insurance Companies etc.

Rating assignment Loan Origination Loan Warehousing • Commercial banks • Mortgage finance companies • Consumer finance companies

etc. • ABCP conduits (single-seller) • ABCP conduits (multi-seller) • SPVs etc. • SIVs Loan Origination Loan Warehousing Loan Origination Loan Warehousing • Commercial banks • Mortgage finance companies • Consumer finance companies

etc. • ABCP conduits (single-seller) • ABCP conduits (multi-seller) • SPVs etc. • SIVs Explicit/Implicit support (Liquidity Facilities, Credit Enhancements)

Credit Rating Agencies (CRAs) Securitisation/ Arrangement Distribution/ Wholesale Funding • SPVs structured by securities companies etc.

• Money market funds (MMFs) • Hedge funds

• Commercial banks etc.

Credit Rating Agencies (CRAs) Securitisation/ Arrangement Distribution/ Wholesale Funding • SPVs structured by securities companies etc.

• Money market funds (MMFs) • Hedge funds • Commercial banks etc. Securitisation/ Arrangement Distribution/ Wholesale Funding Securitisation/ Arrangement Distribution/ Wholesale Funding • SPVs structured by securities companies etc.

• Money market funds (MMFs) • Hedge funds

• Commercial banks etc.

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-The Geneva Association________________________Etudes et Dossiers no. 384

6-3

New international standard for resolution regimes – FSB Key Attributes of Effective

Resolution Regimes

• Mandatory resolvability assessments and recovery and resolution plans for G-SIFIs

Addressing SIFI risks

y y y p

• Additional loss absorption capital for G-SIBs • More intense and effective supervision of all SIFIs

• Strengthening core financial market infrastructure – CPSS/IOSCO standards • Extension to potential non-bank G-SIFIs, domestic SIFIs

• Identification of SIFIs

– IAIS to complete its assessment methodology by June 2012 • More intense and effective supervision

Extending the G-SIFI framework

More intense and effective supervision

– IAIS tightened its Core Principles and will conduct a self-assessment by March 2012

– IAIS to complete a study on supervisory colleges by end 2012

– IAIS to pursue its work to develop a Common Framework for the Supervision of Internationally Active Insurance Groups by 2013

• FSB to set up Peer Review Council to review the full and consistent implementation of the G-SIFI measures

References

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