Claudia Buch: Implications of the too-big-to-fail reforms for global banking

Remarks by Prof Claudia Buch, Vice-President of the Deutsche Bundesbank, prepared for the IIF-BPI Colloquium on Cross-Border Resolution & Regulation, virtual, 9 July 2020.

Central bank speech  | 
04 August 2020
PDF full text
 |  10 pages

1 Motivation

In the aftermath of the 2008 global financial crisis, the G20 endorsed a number of reforms intended to make the financial system safer. A core element of these reforms are policies that are addressing the "too-big-to-fail (TBTF) reforms" in order to reduce moral hazard and systemic risk. These reforms include standards for additional loss absorbency through capital surcharges and requirements for total loss-absorbing capacity, recommendations for enhanced supervision and heightened supervisory expectations, and policies to put into place effective resolution regimes and resolution planning to improve the resolvability of banks.

Many of the systemically important banks affected by these reforms operate across borders. Effective policies to address the too-big-to-fail issue thus require international policy coordination, and the Financial Stability Board (FSB) plays an important role in this regard. Whether a bank is considered to be globally systemically important is based on an internationally agreed set of criteria. On this basis, the FSB publishes an annual list of about 30 globally systemically important banks or G-SIBs. In addition, there are domestic systemically important banks or D-SIBs.