Author Archives: Debra Palmore

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.

Systemic Risk Council Policy Statement to G20 Leaders

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.

In its statement, the SRC expressed its support for maintaining minimal international standards in global financial reform measures. 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 stated a need for prudential supervision to remain a priority and offered specific comments and recommendations to ensure that policymakers stay committed to building a resilient financial system.

Furthermore, 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.

In addition, 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.

Read the full letter here:  Systemic Risk Council Policy Statement to G20 Leaders

 

Sir Paul Tucker Speaks at Finance Watch Conference in Brussels

On 1 June 2016, Sir Paul Tucker delivered the keynote address at the Finance Watch Conference in Brussels.  Sir Paul’s speech, entitled “Reform as Precondition for Competition and Innovation,” highlights the membership, mission, and important work of the Council in providing a needed, independent voice for financial stability.  He observes that desirable competition and innovation within Europe will be the fruits of financial stability, which itself will be the product of needed reforms—most notably a resolution regime based on bail-ins and not bailouts. 

See the full speech below:

Speech by Sir Paul Tucker at the Finance Watch Conference, Brussels – June 1 2016

Jean-Claude Trichet to Join Systemic Risk Council as Senior Adviser

WASHINGTON, D.C.—On 19 May 2016, the Systemic Risk Council welcomes Jean-Claude Trichet as its newest member, joining Paul Volcker as a Senior Adviser to the Council.

Mr. Trichet, currently Chairman of the Group of 30 Consultative Group on International Economic and Monetary Affairs, served as President of the European Central Bank from 2003 to 2011, and as Governor of Banque de France for the 10 years before that. During that period he chaired, amongst many other bodies, the Basel-based group of Governors and Heads of Supervision that oversees the Basel Supervisors Committee.

Sir Paul Tucker, Chair of the Systemic Risk Council, expressed his pleasure at the news. “We are simply delighted that Jean-Claude Trichet joins the Systemic Risk Council as a senior adviser. One of the towering figures in global economic and financial policy, Jean-Claude’s counsel and advice will be invaluable to the SRC as we contribute to building a better regime for preserving financial stability. His involvement is a big step forward in making the Council international without diluting our focus on the US. ”

Sheila Bair, the founding chair of the SRC from 2012 to 2015 and Chair of the Federal Deposit Insurance Corporation from 2006 to 2011, noted that the addition of Mr. Trichet enhances the SRC’s status as a leading authority on systemic risk. “I worked with Jean-Claude during the global financial crisis beginning in 2007 and knew him as a reasoned and prudent defender of financial market stability. His addition to the Systemic Risk Council will only add to the group’s already important contribution to the safety and soundness of the global financial system.” Ms. Bair recently assumed the office of President of Washington College in Chestertown, Maryland.

Paul Volcker, Former Chairman of the Federal Reserve Board and Senior Advisor to the Systemic Risk Council, said, “I am very glad to welcome Jean-Claude Trichet alongside me as a Senior Adviser to this increasingly global council. Under the leadership of Sheila and now Paul, our Council has become a powerful voice for financial regulatory reform.  Jean-Claude coming aboard underlines the international nature of the Council’s membership and work, and will help strengthen our voice around the world.”

Jean-Claude Trichet said: “I appreciate deeply the invitation of Sir Paul Tucker to join the Systemic Risk Council. It is a privilege for me to join him, Sheila Bair, and all the eminent members of the SRC. I consider it not only a great privilege but also an honour to join Paul Volcker as a Senior Adviser to the Council.”

Mr. Trichet currently serves as Chairman of the not-for-profit Group of 30 consultative group in Washington D.C. He is chair of the board of Bruegel, a Brussels-based think tank, and is the European chair of the Trilateral Commission.

The independent, non-partisan Systemic Risk Council (www.systemicriskcouncil.org) was formed in 2012 for the purpose of monitoring and encouraging regulatory reform of U.S. and global capital markets, with a focus on systemic risk.  The Council is the creation of the CFA Institute and the Pew Charitable Trusts and is currently funded by the Institute which is a global association of more than 125,000 investment professionals who put investors’ interests first and set the standard for professional excellence in finance.   Since 2014, it has added European members in order to increase its global expertise and reach.

The Council works collaboratively to seek agreement on each of its recommendations.  The statements, documents, and recommendations of the private sector, volunteer Council do not necessarily represent the views of the CFA Institute.

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About Jean-Claude Trichet

Jean-Claude Trichet was President of the European Central Bank, the European Systemic Risk Board and the Global Economy meeting of Central Bank Governors in Basel until the end of 2011.

Previously, he was in charge of the French Treasury for six years and was Governor of the Banque de France for ten years. Earlier in his career, he held positions within the French civil service, including in the Inspectorate Generale des Finances, the Treasury department and as an advisor to the President of France for microeconomics, energy, industry and research (1978-81).

Mr. Trichet graduated from the École des Mines de Nancy, the Institut d’Études Politiques de Paris and the University of Paris in Economics. He is a Doctor Honoris Causa of several universities and an alumnus of the École Nationale d’Administration.