Financial Stability News

Flashing news about financial stability and central banking

IMF: Financial stability reform lagging behind

This VOX post by one of the leading authors of this years Global Financial Stability Report  Not making the grade: Report card on global financial reform | vox. argues that the pace of reform and restructuring of the financial sector is too slow. Important issues remain unresolved, including

  • Financial systems are still overly complex.
  • Banking assets are highly concentrated (Figure 3), with strong domestic interlinkages.
  • The too-important-to-fail issues are unresolved.
  • Banking systems are still over-reliant on wholesale funding (Figure 4)

There is still little progress (or politicla will?) to tackle the TBTF problem, and the financial system remain too complex. Shadow banking continue to be a problem, as well.

Key question is whether “traditional” program of reform, inkl. Basel 3, will deliver the required reforms in time? The lobbying pressure is intense, ref. the latest defeat of the SEC on money market reform. May be we need other approaches, ref. Haldane’s critique of Basel 3?

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