BIS outlines 'narrow path ahead' in annual report
The BIS's annual report stresses macroeconomic supervision for a sustainable system
BASEL - The Bank for International Settlements (BIS) has released its annual report outlining the "narrow path ahead" for the banking industry and the need to pay attention to medium-term macroeconomic and financial policies.
The BIS report, entitled Rescue, recovery, reform - the narrow path ahead, stresses microeconomic and macroeconomic causes of the financial crisis, including an "under-appreciation of risk", distorted incentives and regulatory failure to prevent the build-up of excess leverage.
The BIS says export and leverage-led models must be banished in favour of a long-term, sustainable approach to growth, and that authorities must encourage this shift through their financial rescue and policy efforts.
The macroeconomic role of supervisors - policing systemic risk - is highlighted most by the BIS, and is crucial in moderating "the pro-cyclicality inherent in the system".
A future role for standards-setting organisations and new macroeconomic watchdogs, such as the Financial Stability Board, is outlined in the report, alongside that of the BIS through its Basel Committee on Banking Supervision.
Part of reform for institutions, says the BIS, "means the comprehensive application of enhanced prudential standards that integrate a system-wide perspective" - that is, international adherence to Basel II in its amended, post-crisis form.
For financial instruments, the BIS says reform means better mechanisms to rate risks, limit their availability and provide effective warnings when they are inappropriate.
For over-the-counter markets, the bank has joined the chorus of opinion calling for trading and clearing through central counterparties and exchanges - as is already being promoted by US regulators and in the EU.
The bank also suggests that, while the crisis period of September and October 2008 forced crucial regulatory measures to ensure financial stability, more is required to cleanse banks' books of remaining toxic assets to properly repair the system.
The report says authorities must "persevere until the job is done" and that national responses to encourage growth should steer clear of the sometimes "unintended consequence" of protectionism.
The report can be read here.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
UK investment firms feeling the heat on prudential rules
Signs firms are falling behind FCA’s expectations on wind-down and liquidity risk management
The American way: a stress-test substitute for Basel’s IRRBB?
Bankers divided over new CCAR scenario designed to bridge supervisory gap exposed by SVB failure
Industry warns CFTC against rushing to regulate AI for trading
Vote on workplan pulled amid calls to avoid duplicating rules from other regulatory agencies
Bank of Communications moves early to meet TLAC requirements
China Construction Bank becomes last China G-Sib to release TLAC plans
Most read
- Top 10 operational risks for 2024
- Japanese megabanks shun internal models as FRTB bites
- LCH issued highest cash call in more than five years