FSB adds BBVA, Standard Chartered to list of key banks

    The Financial Stability Board (FSB), which coordinates global financial regulation, has added Spain’s BBVA and UK-headquartered Standard Chartered banks to its list of global systemically important banks (G-SIBs) and removed Germany’s Commerzbank, the UK’s Lloyds Banking Group and Franco-Belgian Dexia from the list.

    The FSB's latest list of globally important banks is based on data from end-2011 and now comprises 28 banks, down from last year’s list of 29 banks.  Lloyds and Commerzbank were removed from the list due to a “decline in their global systemic importance” while Dexia was taken off as its going through an orderly resolution process.

    Being labeled a systemically important bank or financial institution has consequences as regulators will not only impose stricter supervision but also higher capital charges than other financial institutions.

     The list for the first time divides banks into buckets of additional loss absorbency that is required by regulators. G-SIBs will be subject to resolution planning rules by end-2012 and the additional loss-absorbency requirements will be phased in by January 2016 and fully implanted by January 2019.

    Systemically important banks are defined as those institutions whose distress or disorderly failure would cause significant disruption to the global financial system and economic activity due to their size, complexity and interconnectedness.

Task force issues 7 disclosure principles for banks

    A task force comprised of bankers, investors, analysts, auditors and credit ratings’ officers has issued seven principles that should make it easier for shareholders to grasp the risks posed by banks and help restore their trust in the financial industry.

    The principles from the Enhanced Disclosure Task Force (EDTF), which was formed in May at the initiative of the Financial Stability Board (FSB), is different from recommendations by banking regulators because they arise from discussions between users and prepares of financial reports.

    “These principles provide a firm foundation for developing high-quality, transparent disclosures that clearly communicate banks’ business models and the key risks that arise from them,” said the report, co-chaired by Hugo Baenziger, supervisory board chairman of Eurex, Russell Picot, group general manager of HSBC, and Christian Stracke, managing director of Pimco.

    The principles are mainly aimed at improving risk disclosure by large international banks, but should also be applicable to all banks that access equity and debt markets.

Global insurers weather financial crises – IAIS report

     Insurance companies worldwide escaped relatively unscathed from the global financial crises and were better capitalized at the end of 2011 – the year of the Japanese earthquake/tsunami - than at the end of 2007, according to the first-ever report on the global insurance market.
    The Global Insurance Market Report (GIMAR), which covers the period between 2007 and 2011, was released by Basel-based International Association of Insurance Supervisors (IAIS) and covers both primary insurers and reinsurers.
    “Overall reinsurers lost more equity due to the financial crises in 2008 than they lost due to the unprecedented catastrophes in 2011,” said the report, adding that economic losses from 2011’s 820 natural disasters and nearly 30,000 deaths exceeded $350 billion, the largest losses in history.
    The amount of insured losses in 2011 was around $105 billion, the second largest in history after 2005’s $120 billion (in 2011 value) when the U.S. Gulf Coast was hit by hurricanes Katrina, Rita and Wilma.

Joint Forum wants lead supervisor of conglomerates

     Countries should pick a supervisor with overall responsibility for an entire financial conglomerate to prevent any supervisory blind spots and coordinate and monitor all  risks, according to a final report on "Principles for the Supervision of Financial Conglomerates" by the Joint Forum.
    The global financial crises highlighted the glaring shortcomings of the supervision of financial conglomerates with their myriad of regulated and unregulated units that span national and industry boundaries. Deciding which supervisory body was responsible for which unit was not always clear.
    In response to the crises, the Joint Forum - set up in 1996 to include banking, insurance and securities regulators - published an initial framework in 1999 for how to avoid such supervisory gaps.
    These principles have now been updated to reflect progress made by the Joint Forum's parent committees: the Basel Committee on Banking Supervision, the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS).