G20 watchdog says bank rules working well, digs deeper into markets

Wed Aug 31, 2016 6:03am EDT
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By Huw Jones

LONDON (Reuters) - The financial system's ability to cope with Britain's vote to leave the European Union and with doubts over growth prospects show the benefits of rules introduced since the 2008 collapse of Lehman Brothers bank, a global watchdog said on Wednesday.

The Financial Stability Board (FSB), which coordinates financial regulation across the Group of 20 (G20) economies, has introduced rules forcing lenders to hold more capital since the collapse of Lehman Brothers triggered a financial crisis.

"Events this year have shown that the work to fix the fault lines that led to the financial crisis is paying off and is now helping to support strong, sustainable and balanced growth," FSB chairman Mark Carney said in a letter to G20 leaders who meet in China this weekend.

"As implementation progresses, the financial sector is increasingly absorbing shocks rather than amplifying them."

More work is on the cards.

Carney said the board would make recommendations in early 2017 to reduce misconduct after banks have been fined billions of dollars for attempting to rig interest rate benchmarks and currency markets.

The FSB will also highlight next year regulatory issues that "merit policy attention" in the financial technology or fintech sector.

The FSB has already studied whether rules introduced so far have had unintended effects. Banks have argued they make it uneconomic to hold the inventories of bonds needed to buy or sell at all times to keep markets "liquid".   Continued...

Mark Carney, Bank of England Governor and the chairman of the Financial Stability Board (FSB), leaves a news conference after FSB plenary session in Tokyo, Japan, March 31, 2016. REUTERS/Yuya Shino/File Photo - RTX2DSFJ