G20 to divide banks into 5-6 baskets for supervision

The Korea Times

The Korea Times

National

Fri, December 8, 2023 | 09:30

G20 in Seoul

G20 to divide banks into 5-6 baskets for supervision

Posted : 2010-11-11 17:43

Updated : 2010-11-11 17:43

The G20 will categorize the world’s banks into four to six “baskets” to put them under different levels of capital and liquidity regulations, Korea’s chief financial regulator said Thursday.

Chin Dong-soo, chairman of the Financial Supervisory Commission, speaks during a press briefing at Coex, the main venue of the G20 Summit. / Korea Times

By Cho Jin-seo

The G20 will categorize the world’s banks into five to six “baskets” to put them under different levels of capital and liquidity regulations, Korea’s chief financial regulator said Thursday.

Financial regulators have agreed on how to define and regulate “too-big-to-fail” banks, and the G20 will announce the results today as part of the communique of the Seoul Summit, said Chin Dong-soo, chairman of the Financial Supervisory Commission.

“The banks are now categorized into four to six wide baskets. More specific selection will be made by the BCBS next year,” Chin told reporters. The BCBS is a meeting of central bank governors.

The announcement will be made by Mario Draghi, Italy’s central bank governor, today. A Korean official said that the names of the banks in each basket are not likely be announced tomorrow, as they will subject to careful scrutiny.

The issue of how to regulate systemically important financial institutions (SIFIs) has been one of key issues of the post-crisis financial reform.

Another official at the Seoul G20 preparation committee also rejected claims that banks in Asia won’t be subject to the global SIFI regulations, as it was speculated by some Western media on Wednesday.

“It is not true that Asian banks will altogether be excluded from the list of global SIFIs. There certainly will be some Japanese banks, for example,” he said.

The G20 and the BCBS have been working on the tightened regulations on bank’s capital and liquidity ratios, so that banks can better cope with future financial crises.

The so-called Basel III code was announced last month and is to be endorsed by the G20 national leaders today. But they have also wanted to add more regulations on top of the Basel III code, especially for large banking institutions such as HSBC, Citi and the likes.

Many bank managers have been furious at the attempt, insisting that the additional regulations on SIFIs will damage not only the banks themselves but also the whole global economy.

“There has been talk that G20 leaders might use the summit to call for further capital requirements above and beyond the Basel III levels. I think this would be a mistake. Higher levels are not necessary to make the financial system safer and they would likely act to curtail economic growth,” said Citi CEO Vikram Pandit in an e-mail interview with The Korea Times.

The Korean officials also put a final push on the G20 to take more efforts in establishing financial safeguard for small, developing economies against volatile global capital movement.

Chin said that Korea has made official recommendation to the G20 about introducing so-called “macro-prudential” economic policies at small countries.

“We have submitted a paper to the Financial Stability Board. The two main agenda of the paper are macro-prudential regulations and financial safety net for developing nations,” Chin said during a press briefing, which was held on the sideline of the G20 Seoul Summit.

Kim Choong-soo, the governor of Bank of Korea, also said the same day that Korea needs instruments to make the won-dollar exchange rate more stable, during a separate press conference.

Korea is reviewing various options of capital control, such as taxing foreigners’ purchase of government bonds or establishing a bank levy on non-deposit liabilities. Chin said that such measures will be “directly and indirectly connected to the G20 initiative.”

He did not elaborate on the timing of the implementation of such rules.

cjs@koreatimes.co.kr