Completing the G20's Program to Reform Global Financial Regulation

CIGI Paper No. 55

February 4, 2015

The measures regulators have largely agreed on for a strengthened and internationally harmonized financial regulatory regime, which were endorsed at the 2014 G20 leaders summit in Brisbane, are a major step toward achieving a robust and less crisis-prone global financial system. There are, however, a number of specific measures that need to receive closer attention in order for the G20 leaders to declare their reform program a success. This paper discusses what policy makers and regulators should focus on in 2015 and why closer international cooperation in implementing regulatory reforms will be essential for success.  

It also questions whether the overall design of the reform package has the right balance between micro- and macroprudential regulation to strengthen financial stability as much as its architects expect. In particular, this paper argues that more work needs to be done in two areas. First, the role of macroprudential regulation in the new system needs to be fleshed out so that it is operational and effective. Second, G20 leaders must agree to a concrete timetable to put in place an internationally harmonized resolution regime for large cross-border financial institutions as a key element to address the “too-big-too-fail” problem at a global level. These two steps need to be addressed during 2015 if a more robust regulatory regime to markedly enhance global financial stability is to be in place by the end of this decade.

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