International Association for the
Study of Insurance Economics
Études et Dossiers
Extract from
Études et Dossiers No. 384
8
thInsurance 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
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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
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.
-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