SRC Issues Policy Statement to G20 Leaders on Defending and Strengthening Key Pillars of the Global Reform Program

WASHINGTON, D.C.—On February 27, 2017, the Systemic Risk Council released a policy statement to the finance ministers, governors, chief financial regulators, and legislative committee leaders of the G20 countries.

“The SRC has decided to put on paper our view of the essential ingredients of a safe and sound financial system,” said Sir Paul Tucker, Chairman of the SRC. He stated: “In the wake of unresolved debates at the global level, potential changes to U.S. policy on system stability, and ongoing issues in Europe, the SRC stands ready to make specific comments and recommendations to ensure that policymakers stay committed to building a resilient financial system.”

The Systemic Risk Council is funded by CFA Institute, a global organization of more than 147,000 investment professionals who put investors’ interest first and set the standard for professional excellence in finance.

In its statement, the SRC underlined the vital importance of five core pillars of the global reform program:

  1. mandating much higher common tangible equity in banking groups to reduce the probability of failure, with individual firms required to carry more equity capital, the greater the social and economic consequences of their failure;
  2. requiring banking-type intermediaries to reduce materially their exposure to liquidity risk;
  3. empowering regulators to adopt a system-wide view through which they can ensure the resilience of all intermediaries and market activities, whatever their formal type, that are materially relevant to the resilience of the system as a whole;
  4. simplifying the network of exposures among intermediaries by mandating that, wherever possible, derivatives transactions be centrally cleared by central counterparties that are required to be extraordinarily resilient; and
  5. establishing enhanced regimes for resolving financial intermediaries of any kind, size, or nationality so that, even in the midst of a crisis, essential services can be maintained to households and businesses without taxpayer solvency support—a system of bailing-in bondholders rather than of fiscal bailouts.

The SRC advised that this is not a moment to relax or to retreat from the global reform program, given the debt overhang and impaired macroeconomic policy capability to cushion any shocks to continued recovery. Rather, this is a time for stability of the financial system to remain a priority.

The full text of the letter is available here: Systemic Risk Council Policy Statement to G20 Leaders

Notes for Editors:

The independent, non-partisan Systemic Risk Council (www.systemicriskcouncil.org) was formed to monitor and encourage regulatory reform of U.S. and global capital markets, with a focus on systemic risk. The SRC is funded by CFA Institute, a global association of more than 147,000 investment professionals who put investors’ interests first and set the standard for professional excellence in finance. The SRC works collaboratively to seek agreement on each of its recommendations. The statements, documents and recommendations of the private sector, volunteer SRC do not necessarily represent the views of CFA Institute.

 

Systemic Risk Council Membership

Chair:                        Sir Paul Tucker, Fellow, Harvard Kennedy School and Former Deputy Governor of the Bank of England
Chair Emeritus:      Sheila Bair, President of Washington College and Former Chair of the FDIC
Senior Advisor:       Jean-Claude Trichet, Former President of the European Central Bank
Senior Advisor:       Paul Volcker, Former Chair of the Federal Reserve Board

 Members:

Brooksley Born, Former Chair of the Commodity Futures Trading Commission
Baroness Sharon Bowles, Former Member of European Parliament and Former Chair of the Parliament’s Economic and Monetary Affairs Committee
Bill Bradley, Former U.S. Senator
William Donaldson, Former Chair of the Securities and Exchange Commission
Jeremy Grantham, Co-Founder and Chief Investment Strategist, Grantham May Van Otterloo
Richard Herring, The Wharton School, University of Pennsylvania
Simon Johnson, Massachusetts Institute of Technology, Sloan School of Management
Jan Pieter Krahnen, Chair of Corporate Finance at Goethe-Universität in Frankfurt and Director of the Centre for Financial Studies
Sallie Krawcheck, Chair, Ellevate, Former Senior Executive, Citi and Bank of America Wealth Management
Lord John McFall, Former Chair, UK House of Commons Treasury Committee
Ira Millstein, Senior Partner, Weil Gotshal & Manges LLP
Paul O’Neill, Former Chief Executive Officer, Alcoa, Former U.S. Secretary of the Treasury
John Reed, Former Chairman and CEO, Citicorp and Citibank
Alice Rivlin, Brookings Institution, Former Vice-Chair of the Federal Reserve Board
Kurt Schacht, Managing Director, Standards and Advocacy Division, CFA Institute
Chester Spatt, Tepper School of Business, Carnegie Mellon University, Former Chief Economist, Securities and Exchange Commission
Lord Adair Turner, Former Chair of the UK Financial Services Authority and Former Chair of the Financial Stability Board’s Standing Committee on Supervisory and Regulatory Cooperation
Nout Wellink, Former President of the Netherlands Central Bank and Former Chair of the Basel Committee on Banking Supervision

* Affiliations are for identification purposes only. SRC members participate as individuals and this letter reflects their own views and not those of the organizations with which they are affiliated.