Building a More Resilient Financial Sector : Reforms in the Wake of the Global Crisis

Book
Back Matter

Back Matter

Author(s):
Aditya Narain, Inci Ötker, and Ceyla Pazarbasioglu
Published Date:
April 2012
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References

Index

[Page numbers followed by f, n, or t refer to figures, footnotes, or tables, respectively.]

A

  • Accountability

    • of macroprudential authorities, 30

    • subsidiarization rationale, 226

    • of supervisors, 5, 20, 21, 93, 94

B

  • Bail-in proposals, 151–153, 172

  • Bank for International Settlements, 5, 24, 29, 30, 258

  • Bank holding companies, 54, 201, 204, 205, 207, 209

  • Bank Holding Companies Act, 205

  • Basel Committee on Banking Supervision

    • capital and liquidity requirements, 3, 18, 38, 43–52, 57, 161, 182–183

    • countercyclical risk calculation, 29, 41–42

    • Core Principles for Effective Banking Supervision, 87, 88–89

    • Cross-Border Bank Resolution Group, 101, 110–112, 125–127, 191

    • in future of regulatory reform, 258

    • minimum common equity ratio, 144, 163–164

    • phased implementation of capital and liquidity rules, 4, 18–20, 19t, 40, 41t, 46, 64t, 182

    • point of nonviability proposal, 169–170

    • regulatory reform proposals, 38–40

    • on supervision of cross-border operations, 58, 234–235

  • Bear Sterns, 72

C

  • Capital and liquidity buffers

    • composition, 19–20, 40, 43, 54, 63–64

    • current reform efforts, 3

    • effects of reform proposals on LCFIs, 43–52, 57

    • effects of reform proposals on size of financial system, 254

    • goals for financial system, 1, 16

    • goals of new prudential regulation, 78

    • intangible and qualified assets in, 19–20, 40, 63

    • macroeconomic impact of reforms, 18

    • market-maker obligations to improve, 81

    • methodology for estimating impact of reforms, 61–64

    • origins of global financial crisis, 14, 18

    • phased implementation of Basel III requirements, 4, 18–20, 19t, 40, 41t, 46, 64t, 182

    • reforms in response to global crisis, 18–20, 40–41, 163–164, 182–183

    • risks for centralized LCFIs, 104–105

    • safeguards to prevent systemic risk, 57–58

    • for SIFIs, 8, 145–146, 154, 170, 171

    • See also Contingent capital instruments

  • Central banks

    • access to discount withdrawal facility, 201

    • access to emergency liquidity facilities of, 28, 120, 121, 146, 165, 172

    • in development and use of macroprudential policies, 30

    • regulator relationship, 93

    • risk assessment activities, 82

  • Central counterparties clearance, 27–28, 257

  • Choice between branch and subsidiary structure

    • business model considerations, 226–227, 229–230

    • cost considerations, 225, 237, 242–244

    • credit supply considerations, 232–233

    • current geographical distribution, 227, 231–232t

    • degrees of centralization, 222, 223–224

    • determinants of, 222, 228–230, 238

    • financial stability and, 223–227

    • home/host country factors in, 227, 228–229

    • liquidity management considerations, 226

    • management structure and function, 224

    • policymaker perspective, 232–237, 238

    • resolution considerations, 236–237, 239

    • risk management considerations, 226, 238–239

    • sharing of affiliate losses, 225, 235

    • stand-alone subsidiarization, 236, 241–242t

    • supervision responsibility, 222, 233, 234–235

    • trade-offs in, 221–222, 235–236

    • vulnerability to shocks, 225, 233–235

    • See also Cross-border operations; Subsidiarization

  • Clearing and settlement activities, 27, 54, 77, 79, 81, 127, 226, 257

  • Collateralized debt instruments, 80

  • Collateral valuation, 27

  • Competition

    • distortions associated with SIFIs, 136

    • expected reform outcomes, 11

    • goals for financial system, 1, 17

    • Volcker Rule effects, 209

  • Concentration of banking system, 39f, 134n, 255–256

  • Contingent capital instruments

    • applications, 165, 173

    • conversion rate, 166–167, 180–181t

    • in crisis management framework, 8, 26, 173

    • current interest in, 145, 161

    • with debt write-off features, 166–167

    • design, 173

    • distinctive features, 163

    • future prospects, 167–169, 173

    • versus hybrid instruments, 163, 182–184

    • as loss-absorbing buffer, 170–172

    • modeling of, 163, 173–177

    • monitoring, 173

    • purpose, 162

    • rationale, 8, 145, 161, 163–164

    • recent implementations, 169–172

    • tax and regulatory treatment, 167–168

    • trigger conditions, 26, 164–166, 169–170, 173, 178–179t

  • Contingent convertible bonds. See Contingent capital instruments

  • Counterparty risk, 252, 254, 257

    • Basel Committee proposals, 18, 40, 61, 140

    • branch versus subsidiary model, 226

    • concerns, 27

    • oversight, 73, 76, 81

    • requirements for ring-fenced banks, 211, 214

  • Credit default swaps, 80, 252

  • Credit rating agencies, 28, 204

  • Cross-border operations

    • centralization decisions, 222

    • crisis prevention and preparedness, 109, 111

    • future prospects, 254–255

    • growth of, 103–104

    • implementation of recovery and resolution plans, 192

    • implications for utility banking proposals, 200

    • international standards for supervision, 108

    • need for international coordination on, 237

    • origins of global financial crisis, 2, 38, 238

    • proposal for subsidiary structure of SIFIs, 10, 56–57, 112, 143–144, 190–191

    • as source of systemic risk for host jurisdiction, 105

    • Spanish model, 239–240

    • structure and organization, 104–105, 221–223

    • supervisory function in, 96, 103, 233, 234–235

    • See also Choice between branch and subsidiary structure; Resolution framework for cross-border banks

D

  • Deferred tax assets, 63–64

  • Deposit guarantee scheme, 120

  • Derivatives markets

    • clearing facilities, 257

    • effects of reforms, 52, 54–55

    • evolution of financial industry supervision, 74, 84

    • scope of regulation, 81

    • strategies for improving resilience of, 27–28

    • systemic risk prevention, 141n

  • Dodd-Frank Act, 54–55, 142, 150 See also Volcker Rule

E

  • Economic growth

    • effect of capital and liquidity requirement reforms, 18

    • future prospects, 252–253

    • goals of financial system reform, 3, 247

    • risk taking and, 16, 248

    • size of financial sector, 15f

F

  • Federal Deposit Insurance Corporation, 114n

  • Financial Sector Assessment Program, 20, 32, 87, 258–259

  • Financial Stability Board, 1, 5, 13, 24, 27, 28, 29, 30, 58, 95, 111, 135, 161, 186, 207, 258

  • Financial stability contributions, 22, 25–26

  • Financial Stability Oversight Council, 207, 208t

  • Financial system reforms, generally

    • effects on markets, 256–257

    • effects on size of financial system, 254

    • effects on structure of banking system, 255–256

    • future prospects, 12, 15–16, 32, 248–249, 251–257

    • goals, 1, 2, 3, 11–12, 16–17, 31–32, 247

    • macroprudential strategies for enhancing resilience, 24–30

    • rationale, 59–60t

    • response to global crisis, 2, 3f, 11, 13, 15–16, 35–36, 38–42, 247, 251

    • role of International Monetary Fund, 258–259

    • See also Implementation of reforms; Regulation

  • Fixed income, commodities, and credit instruments, 54–55

  • Fortis Group, 109, 110

G

  • Glass-Steagall restrictions, 142, 204–205

  • Global financial crisis

    • bail-out rationale for TITFs, 194

    • determinants of country outcomes, 83

    • effects of hybrid capital instruments, 163

    • lessons of, 75, 247

    • origins of, 1–2, 13, 14–15, 27, 35, 37–38, 37f, 73–75, 86, 134, 161, 201–202, 218, 238, 247, 249–251

    • reform efforts in response to, 2, 3f, 11, 13, 15–16, 35–36, 38–42, 72–73, 161

    • regulatory approach preceding, 71–72

    • supervision failures in, 86–87

  • Global systemically important banks, 145, 170

  • Group of Twenty, 1, 13, 22, 27, 30, 38, 71, 96, 101, 186

H

  • Hedge funds

    • assessment challenges, 207

    • contingent capital instruments market and, 168, 182

    • Glass-Steagall restrictions, 205

    • rationale for regulation, 76, 203

    • regulatory response to crises, 72, 73, 76

    • Volcker Rule requirements, 26, 52, 54, 142, 204, 207

  • Household borrowing, 249

  • Household borrowing and saving, 254

I

  • Implementation of reforms

    • international framework for resolution, 23–24, 58, 102, 124–125

    • key tasks, 3

    • monitoring effects of, 31

    • need for global consistency and coordination in, 11, 31, 32, 56, 58, 101

    • phased-in capital and liquidity requirements, 4, 18–20, 19t, 40, 41t, 46

    • policy implications of SIFI reform proposals, 216–217

    • prevention of unintended consequences of regulatory reforms, 75

    • private sector role in, 3, 13

    • recovery and resolution plans, 9, 151, 188–189, 191

    • role of international institutions, 13, 32, 33t, 258–259

    • significance of, in reform effectiveness, 87

    • systemic risk shifting in response to, 4, 8, 36, 56, 193, 195, 200, 216–217

  • Independent Commission on Banking (United Kingdom), 144, 204, 209–215, 216

  • Insurance, bank involvement in

    • Basel capital requirements, 45, 53

    • globalization trends, 103

    • market value of, 156

    • principles of supervision, 90

    • reforms in response to global crisis, 72–73

    • supervision before global crisis, 84

  • Interest rates

    • competitive advantages of SIFIs, 136, 136f

    • macroprudential policies to reduce systemic risk, 30

  • International Accounting Standards Board, 258

  • International Association of Deposit Insurers, 258

  • International Association of Insurance Supervisors, 82, 87, 90

  • International Monetary Fund, 2, 5, 13, 17, 18, 24, 27, 28, 29, 30, 32, 33t, 58, 147, 255, 258–259

  • International Organization of Securities Commissions, 80, 81, 82, 87, 89–90, 258

  • International Swaps and Derivatives Association, 127

  • Investment banks

    • branch versus subsidiary structure, 226–227

    • definition, 156

    • effects of regulatory proposals, 52, 53f, 54–55

    • proposed capital and liquidity requirements, 4, 44–45, 52

    • Volcker Rule requirements, 203

L

  • Large and complex financial institutions (LCFIs)

    • asset composition leading up to crisis, 38

    • definition, 35n

    • effects of proposed capital requirements, 42–47, 61–64

    • effects of proposed liquidity requirements, 42–43, 47–52, 48t

    • effects of proposed regulations, 36–37, 56

    • evolution of financial industry supervision, 85

    • financial system reform needs, 2

    • growth of, 103–104

    • origins of global financial crisis, 2, 35, 37–38, 134, 251

    • reform efforts in response to global crisis, 36

    • risks for centralized organizations, 104–105

    • structure and organization, 104

    • See also Systemically important financial institutions (SIFIs)

  • Lehman Brothers, 22, 27, 72, 109, 110

  • Leveraging of financial system

    • current reform requirements, 40

    • filter rule test, 218–220

    • goals of new prudential regulation, 78

    • origins of global financial crisis, 14, 218, 250

    • rationale for regulation, 75–76, 77

  • Liquidity Coverage Ratio, 40

  • Living wills. See Recovery and resolution plans

  • Long-Term Capital Management, 73, 76

M

  • Macroprudential policies

    • financial system reform needs, 3, 30

    • goals for financial system reform, 17

    • monetary policy and, 30

    • reform rationale, 59–60t

    • reforms in response to global crisis, 2, 41–42

    • research needs, 30, 31

    • strategies for increasing systemic resilience, 24–29

  • Market functioning

    • branch versus subsidiary structure considerations, 227, 230, 233

    • distortions associated with SIFIs, 136–137

    • entry and exit, 1, 17

    • future prospects, 256–257

    • origins of global financial crisis, 72, 75

    • strategies for enhancing resilience in, 27–29

    • transparency, 29

  • Microprudential policies

    • goals for financial system reform, 17

    • reform rationale, 59–60t

    • reforms in response to global crisis, 2

    • strategies for increasing institutional resilience, 17–24

  • Mortgage servicing rights, 64

N

  • Narrow funding banks, 193, 195, 201–202, 217

  • Net stable funding ratio, 19, 40–41, 49

    • methodology for assessing impact of, 65–66t

  • Nonbank financial system

    • future prospects, 253

    • in global financial crisis, 15

    • growth of, 16f, 250

    • regulatory goals, 17, 19, 31, 253

    • resolution, 6, 23, 103, 106, 150

O

  • Off-balance-sheet activities

    • accounting rules, 29, 149

    • current status, 15

    • regulatory reforms, 72

    • supervision, 86, 91

    • trends before global crisis, 35, 72, 84, 249

P

  • Prevention and preparedness, 109, 111, 251

  • Private equity investments

    • bail-in debt to aid resolution of, 151–153

    • regulatory goals, 76, 82

    • Volcker Rule on, 26, 52, 54, 142, 204, 205

  • Private sector

    • debt-for-equity conversions for resolution, 22–23

    • funding of resolution process, 120–122

    • in implementation of reforms, 3, 13

    • industry views on potential impacts of reforms proposals, 67–69t

    • origins of global crisis, 2

    • supervisor relationship with, 95

  • Procyclicality

    • contingent capital investments and, 8, 170, 173, 183–184

    • current reform efforts, 41–42

    • goal of reforms, 1, 2, 16, 24, 252

    • origins of global financial crisis, 250

    • research needs, 29

  • Proprietary trading

    • complementary regulations to ban on, 216, 217

    • filter rule test, 218–220

    • future prospects, 209, 254

    • LCFI activities, 56n

    • Volcker Rule on, 26, 52, 54, 142, 203, 204, 205, 207, 209

R

  • Rabobank Senior Contingent Notes, 167

  • Recovery and resolution plans, 22

    • benefits, 188, 191

    • in crisis management framework, 186

    • cross-border implementation, 192

    • data needs for, 187, 188–189

    • definition, 185

    • development of, 187–188

    • effects on business strategy, 56–57

    • goals for SIFIs, 186, 237n

    • implementation challenges, 9, 151, 188–189

    • interaction with other plans, 189–191

    • policy implications, 191–192

    • rationale, 9, 151, 185–186

    • recent implementations, 191

    • recovery component, 186–187

    • resolution component, 187

    • structure, 151

    • subsidiarization and, 237

  • Reducing size of SIFIs

    • challenges to, 10, 143

    • potential negative consequences of, 10, 22

    • rationale, 9, 142, 194

    • recent initiatives, 142–143

    • separation of financial and nonfinancial activities, 79–80, 142–143

    • strategies for, 9, 22

    • structural constraints to, 26–27

    • utility banking proposals, 196–201

  • Regulation

    • branch versus subsidiary structure considerations, 227, 228, 233–235

    • of companies with financial and nonfinancial activities, 79–80

    • conduct-of-business, 77

    • of credit rating agencies, 28

    • current compliance with good practices, 20, 21f

    • design of new prudential regulation, 77–80

    • effects of proposals on LCFIs, 36–37

    • financial system reform needs, 2, 3, 31

    • future prospects, 32, 248, 251–257

    • goals for financial system reform, 17, 73, 75–77

    • implications for bank business strategies, 52–56

    • industry views on potential impacts of proposals, 67–69t

    • lessons from global crisis, 4, 75

    • of nonbank institutions, 253

    • organization and governance of, 80

    • origins of global financial crisis, 2, 4, 13, 14, 15, 37–38, 72, 73–75, 86, 247, 250–251

    • prevention of unintended consequences of, 57–58, 72, 75

    • procyclicality risk, 16, 24, 41–42, 147

    • of products, 80–81

    • rationale for limiting, 71–72, 75

    • rationale for wider perimeter of, 4, 17, 58, 71, 75

    • recommendations for expanded perimeter, 73, 75, 82

    • reform challenges, 4–5

    • reforms in response to global crisis, 2, 3f, 11, 13, 15–16, 35–36, 38–42, 72–73, 248, 251

    • research needs, 31

    • scope of financial institutions subject to, 77, 78–79

    • supervision and, 5, 93

    • systemic risk assessment to determine boundaries of, 25, 82

    • systemic risk shifting in response to, 4, 8, 36, 56, 193, 195, 200, 216–217, 253

  • Remuneration practices, 74

  • Repo markets, 27

  • Resolution framework for cross-border banks

    • authority for, 116–117, 125

    • basic elements, 114–115

    • challenges to development, 6, 9

    • communication and information management in, 124

    • coordination standards for, 115, 116–119, 255

    • corporate solvency model, 112–114

    • costs of current approach, 108–109

    • creditor safeguards in, 117, 118

    • Cross-Border Bank Resolution Group initiatives, 110–112, 125–127

    • current status, 150, 255

    • deposit guarantee scheme, 120

    • funding of resolution process, 115, 120–122

    • harmonization of national law for, 116–118

    • implementation issues, 23–24, 58, 102, 124–125

    • leadership for implementation, 122–123

    • modification of national law for, 114, 115–116

    • national frameworks, 105–107

    • need for, 6, 17, 58, 101–102, 103–104, 124, 153, 237, 239

    • nonbank institutions and, 103, 106, 123

    • objectives, 101–102, 251

    • obstacles to, 150

    • proposed structure, 6, 23

    • risk mitigation mechanisms, 126–127

    • scope of activities in, 102

    • strategies for, 22

    • supervision frameworks and, 103, 107, 108, 118–119

    • territoriality approach to insolvencies, 107

    • transfer of contractual relationships, 127

    • treaty approach, 102, 111–112

    • United Nations Model Law, 113, 127–131

    • universality approach to insolvencies, 107, 111–112, 114

    • See also Cross-border operations

  • Resolution of failed institutions

    • bail-in power to aid in, 151–153, 172

    • cross-border banks. See Resolution framework for cross-border banks

    • current status of plans for, 6

    • debt-to-equity conversions for, 22–23, 151

    • funding for cost of, 22

    • goals for financial system, 1, 3, 16, 17

    • lesson from global crisis, 22

    • levy on SIFIs to reduce effects of, 22, 25–26

    • origins of global financial crisis, 251

    • proposed framework, 23–24

    • reform challenges, 6, 23

    • SIFIs, 6–7, 8, 149–151

    • significance of, in reform effort, 6, 22

    • strategies for, 22

    • use of contingent capital instruments, 165, 166

    • See also Recovery and resolution plans

  • Ring-fencing

    • capital costs, 242–244

    • cross-border resolution and, 23, 105, 106, 130

    • motivation, 107, 115, 195, 210

    • policy implications, 195

    • protection from contagion, 211–212

    • recent policy formulations, 142–143, 193, 195, 209–210

    • requirements under, 195, 210–211, 213–214

    • retail operations, 214–215

    • See also Subsidiarization

  • Risk management

    • benefits of utility banking, 197–198

    • counterparty clearance, 257

    • current trends in global financial system, 252–253

    • economic growth and, 16, 248

    • goals of regulation, 75–77

    • goals of Volcker Rule, 203

    • growth of cross-border operations, 104

    • incentives, 73, 79, 248

    • levies and surcharges to improve, 25–26, 144–145, 146–147

    • liquidity risk assessment, 146, 146n

    • models of bailout and, 173–177

    • origins of global financial crisis, 2, 13, 14, 35, 37–38, 72, 73–75, 250–251

    • prevention of unintended consequences of reforms, 57–58, 72, 75, 216–217

    • procyclicality effects, 29

    • rationale for contingent capital instruments, 163, 164–166

    • rationale for limiting prudential regulation, 71–72

    • recommendations for capital and liquidity requirements, 18

    • remuneration practices and, 74

    • securitization and, 28–29

    • shielding ring-fenced banks from contagion, 211–212, 213–214

    • in SIFIs, 8, 194

    • strategies to reduce systemic risk, 25–27, 35–36

    • supervision failures in global financial crisis, 86–87

    • systemic risk assessment, 24–25, 73, 82

    • TITF problem, 133–134

    • in traditional banking, 193–194

    • transparency and disclosure for, 5

    • See also Reducing size of SIFIs; Regulation; Supervision

S

  • Securities market

    • origins of global financial crisis, 74–75

    • reforms in response to global crisis, 72–73

    • scope of regulation, 81

    • Volcker rule effects on competition in, 209

  • Securitization

    • effects of reforms, 52

    • evolution of financial industry supervision, 84

    • future of regulation, 29, 253

    • origins of global financial crisis, 28, 74, 75

    • reforms in response to global crisis, 28–29

  • Shadow banking

    • assets, 71

    • definition, 56n

    • financial sector interconnectedness, 38

    • growth, 16f

    • liabilities preceding crisis, 39f

    • origins of global financial crisis, 15, 38, 39f

    • systemic risk shifting in response to regulation, 4, 8, 36, 56, 193, 195, 200, 216–217, 257

  • Special Investment Vehicles, 76, 77

  • Stand-alone subsidiarization, 236, 241–242t

  • Subsidiarization

    • allowable activities, 210–211

    • assessment challenges, 213–214

    • costs, 144, 190–191, 242–244

    • home/host country policy decisions, 232–237

    • implementation in United Kingdom, 209–215

    • management structure, 212

    • objective, 210

    • organization of retail banking, 214–215

    • protection from contagion, 211–212

    • prudential capital constraints, 212, 212t

    • rationale, 10, 56–57, 112, 143–144, 195, 210

    • restrictions on intragroup transactions, 212, 213–214

    • systemic risk for host jurisdiction in, 105

    • See also Choice between branch and subsidiary structure; Ring-fencing

  • Supervision

    • accountability for, 21, 93, 94

    • agency mandates for, 20, 21

    • characteristics of financial industry oversight, 84

    • colleges, 111, 119n, 255

    • compliance-based, 84

    • of cross-border operations, 96, 222, 233, 234–235

    • current compliance with good practices, 20, 21f, 87–90

    • as determinant of financial crisis outcomes, 83

    • development of recovery and resolution plans, 188

    • enforcement-based, 84

    • evolution of, in financial industry, 84–85

    • financial system reform needs, 2, 3, 17

    • framework for enhancing, 20, 21

    • future prospects, 252

    • goals for new prudential regulation, 78

    • international cooperation in resolution and, 103, 107, 108, 118–119

    • international standards, 98–100t, 108, 118–119, 255

    • legal authority, 92

    • lessons from global crisis, 85

    • objectives, 94

    • operational independence for, 94

    • organization and processes, 93

    • origins of global financial crisis, 2, 13, 86–87, 247, 250–251

    • professional status, 96

    • recommendations for, 95–96

    • reforms in response to global crisis, 72–73

    • regulation and, 5, 93

    • relationships with other agencies, 93

    • relationship with industry, 95

    • requirements for effectiveness, 5, 20, 85, 90–95, 97

    • resources for, 21, 92, 94, 96

    • ring-fenced banks, 213–214

    • risk assessment capacity for, 21

    • risk-based, 84

    • scope of activities in, 83

    • of SIFIs, 5, 8, 147–148

    • significance of, in reform effort, 5, 20, 83

    • strategy for, 21, 93

    • Volcker Rule implementation challenges, 207

  • Swap Push-out Rule, 143

  • Systemically important financial institutions (SIFIs)

    • bail-in power to aid resolution of, 151–153, 172

    • bail-out decisions, 139, 140, 194

    • benefits of, 135–136, 221

    • capital and liquidity buffer requirements, 145–146, 154, 170, 171

    • competitive advantage, 136–137

    • cross-border activity, 138

    • current risk mitigation efforts, 2, 41–42, 42t 140

    • data template for, 5

    • definition, 73, 75–76, 133n

    • design of new prudential regulation, 78–80

    • economies of scale/scope, 155

    • financial stability contributions, 22, 25–26

    • frequency of distress, 138–139, 138f

    • future prospects, 135, 154

    • interconnectedness, 134, 137f, 138

    • interest rates charged to, 136, 136f

    • market value, 155–156

    • origins of global financial crisis, 134, 194

    • outcomes of global financial crisis, 134

    • policy implications of reform proposals, 216–217

    • political influence, 137

    • recent growth, 137, 137f, 139–140

    • recovery and resolution plans, 151, 186

    • reform challenges, 6–8, 143

    • reform goals, 11–12, 73, 135, 140

    • resolution strategies, 22, 149–151

    • risk assessment, 24–25, 73

    • risk-based levies and surcharges, 25–26, 144–145, 146–147

    • risk-based prudential requirements, 25

    • risk of unintended consequences in

    • rescoping of, 195–209, 216–217

    • risks associated with, 194, 221

    • size characteristics, 137–138, 157–159

    • strategies for risk reduction, 8, 25–27, 135, 140, 141–142, 141f, 194–195, 221

    • subsidiarization proposals, 10, 56–57, 105, 112, 143–144, 190–191

    • supervision needs, 5, 147–148

    • transparency of operations, 8, 148–149

    • See also Recovery and resolution plans; Reducing size of SIFIs; Too-important-to-fail institutions

T

  • Taxation

    • branch versus subsidiary structure considerations, 227, 228–229

    • of multinational groups, 104

    • to reduce institutional risk taking, 26

    • risk-related levies and surcharges, 144–147

    • treatment of contingent capital instruments, 167

  • Too-important-to-fail institutions

    • bail-out rationale, in global crisis, 194

    • capital and liquidity buffer requirements, 154

    • contingent capital strategies for, 162–164

    • financial system reform needs, 2

    • nature of risk associated with, 133–134, 153, 221

    • origins of global financial crisis, 2, 15, 134

    • outcomes of global financial crisis, 134

    • strategies to reduce risk from, 153–154, 221

    • See also Recovery and resolution plans; Reducing size of SIFIs; Systemically important financial institutions (SIFIs)

  • Traditional commercial banks

    • efficient size, 155

    • growth, 16f

    • liabilities preceding crisis, 39f

    • ownership concentration, 39f

    • proposed capital and liquidity rules, 4, 52

    • Volcker Rule requirements, 203

  • Transparency

    • to assess systemic risk, 73

    • expected reform outcomes, 11

    • financial system reform needs, 2, 5

    • future prospects, 256–257

    • goals for financial system, 1, 16, 17

    • origins of global financial crisis, 14, 37–38

    • in SIFIs, 8, 148–149

    • significance of, in reform effort, 5

    • strategies for enhancing market stability, 29

U

  • United Nations Commission on International Trade Law, 112–114, 116n, 127–131

  • Universal banks

    • branch versus subsidiary structure, 222, 226–227

    • current capital structure, 43

    • definition, 103n, 156

    • growth of, 103–104, 194

    • proposed capital requirements, 44–45, 46, 53

    • ring-fencing, 209–210, 211, 213

    • SIFI banks, 138, 139, 140

    • transformation into utility banks, 196f, 200–201, 216

    • Volcker Rule and, 52, 54

    • vulnerability to shocks, 194

  • Utility banking

    • adjustment costs, 200–201

    • definition, 196

    • impact analysis, 199t

    • implementation challenges, 200

    • policy implications of SIFI reform proposals, 216–217

    • rationale, 196

    • risk reduction benefits, 197–198

    • scope of proposals for, 196–197, 197f social costs, 198–199

    • transformation of universal banking into, 196f, 201, 216f

V

  • Volcker Rule

    • challenges to implementation, 195

    • effects on competitiveness in securities markets, 54, 209

    • essential requirements, 26, 52, 56, 195, 204–205, 205f, 206t implementation, 204

    • implementation challenges, 193, 205–209

    • Independent Commission on Banking ring-fencing rules and, 214, 215t, 216

    • rationale, 142–143, 203–204

    • risk of unintended consequences, 193, 195, 209