21 June 2019

Mr. Randal Quarles
Chair
Financial Stability Board
Bank for International Settlements
CH-4002 Basel
Switzerland

By email: [email protected]

Re: Response to the FSB’s consultation on evaluation of too-big-to-fail reforms for banks

Dear Chairman:
The Global Financial Markets Association (GFMA) appreciate the opportunity to comment on the Financial Stability Board’s (FSB) consultation on the effects of the too-big-to-fail (TBTF) reforms for banks. We welcome the FSB’s evaluation of the effects of the G20 reforms to address “too-big-to-fail” (TBTF). In this response, we outline the key achievements in addressing TBTF, what are the areas that warrant further analysis and what other questions should be asked in order to complete the evaluation.
By way of background, the GFMA has been actively involved with the development of the post-crisis reform package by providing feedback on almost all consultations by the FSB and the Basel Committee
on Banking Supervision (BCBS), either independently or jointly with other industry associations.
We have also contributed several studies to the coherence and calibration initiative. These include an in-depth analysis1 on the impacts and interactions of the regulatory reform package which we
commissioned from Oliver Wyman. In addition, we produced an analysis of the post-crisis reforms and their impacts on the evolution of the repo and broader SFT markets jointly with the ICMA2 and an ex
post study of the impact of regulation on banks’ capital market activities3.
GFMA strongly supports the objectives of the reforms to reduce systemic and moral hazard risk resulting from institutions which are deemed too big to fail. Achieving these goals is essential to improve and maintain financial stability necessary for a well-functioning global financial system.
Together with enhanced cross-border cooperation these elements help ensure a global financial system which promotes and underpins sustainable growth.
There has been very significant progress in implementing these reforms in the key jurisdictions. Both going and gone concern loss absorbing capacity has increased by multiples, resulting in much lower
probabilities of failure and losses given default. TLAC is a key factor in ensuring that any GSIB can be resolved effectively without taxpayers bearing losses. The significant build-up of this can be observed in many key G20 jurisdictions. In addition to this, the ECB have opined on the reduced likelihood of failure and substantive increase in loss-absorbing capacity4. The GFMA believes that the methods used by the ECB in their analysis to assess the probability of default as well as bank and systemwide loss absorbing capacities are extremely helpful in analysing how effectively the issue of TBTF has been dealt with.

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1 http://www.oliverwyman.com/our-expertise/insights/2016/aug/post-crisis-basel-reforms.html
2 https://www.gfma.org/correspondence/the-gfma-and-icma-repo-market-study-post-crisis-reforms-and-theevolution-
of-the-repo-and-broader-sft-markets/
3 https://www.pwc.se/sv/pdf-reports/global-financial-markets-liquidity-study.pdf
4 Carmassi, J., Corrias, R. and Parisi, L. (2019), “Is taxpayers’ money better protected now? An assessment of
banking regulatory reforms ten years after the global financial crisis”, Macroprudential Bulletin, Issue 7, ECB,
March 2019 – https://www.ecb.europa.eu/pub/financial-stability/macroprudentialbulletin/
html/ecb.mpbu201903_01~c307e09dd7.en.html