Extract from. Études et Dossiers No th Insurance and Finance Seminar of The Geneva Association 7-8 December 2011 London

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1 International Association for the Study of Insurance Economics Études et Dossiers Extract from Études et Dossiers No th Insurance and Finance Seminar of The Geneva Association 7-8 December 2011 London & Presentations on The Geneva Association s Financial Stability in Insurance Initiative This document is free to download from The Geneva Association website, February 2012 Working Paper Series of The Geneva Association Association Internationale pour l'etude de l'economie de l'assurance The Geneva Association - General Secretariat - 53, route de Malagnou - CH-1208 Geneva Tel.: Fax: secretariat@genevaassociation.org -

2 The Geneva Association Working Paper Series Études et Dossiers appear at irregular intervals about times per year. Distribution is limited. The Études et Dossiers are the working paper series of The Geneva Association. These documents present intermediary or final results of conference proceedings, special reports and research done by The Geneva Association. Where they contain work in progress or summaries of conference presentations, the material must not be cited without the express consent of the author in question. The opinions expressed in Geneva Association newsletters and publications are the responsibility of the authors. We therefore disclaim all liability and responsibility arising from such materials by any third parties. This document is free to download from The Geneva Association website, please visit:. Layout & Distribution: Valéria Pacella The Geneva Association Association Internationale pour l'etude de l'economie de l'assurance

3 The FSB SIFI Framework Grace Sone Mandate of the Financial Stability Board (FSB) Assess vulnerabilities affecting the financial system and identify and oversee action needed to address them; Promote coordination and information exchange among authorities responsible for financial stability; Monitor and advise on market developments and their implications for regulatory policy; Advise on and monitor best practice in meeting regulatory standards; Undertake joint strategic reviews of the policy development work of the international standard setting bodies to ensure their work is timely, coordinated, focused on priorities, and addressing gaps; Set guidelines for and support the establishment of supervisory colleges; Manage contingency planning for cross-border crisis management, particularly with respect to systemically important firms; and Collaborate with the IMF to conduct Early Warning Exercises. Source: FSB website (

4 The FSB s financial reform agenda in Implementation of reforms to bank capital and liquidity standards (Basel II/III); Strengthening the regulation and oversight of the shadow banking system; Improving the OTC and commodities derivatives markets; Addressing systemically important financial institutions (SIFIs); - Global SIFI (G-SIFI) determination and loss absorbency - Resolution tools and regimes - Supervisory intensity and effectiveness Developing macroprudential frameworks and tools; Convergence on the strengthened accounting standards; Strengthening adherence to international supervisory and regulatory standards; Reforming compensation practices to support financial stability; Financial stability and regulatory issues in emerging and developing countries Enhancing consumer protection Source: The G20 Seoul Summit Document ( The structure of the shadow banking system Shadow banking can be composed of a single entity or involve multiple entities forming a chain of credit intermediation. Credit Intermediation Chain Facilitation of Maturity/Liquidity Transformation Loan Origination Loan Warehousing Commercial banks Mortgage finance companies Consumer finance companies ABCP conduits (single-seller) ABCP conduits (multi-seller) SPVs Explicit/Implicit support (Liquidity Facilities, Credit Enhancements) Banks, Insurance Companies Securitisation/ Arrangement SIVs SPVs structured by securities companies Rating assignment Credit Rating Agencies (CRAs) Distribution/ Wholesale Funding Money market funds (MMFs) Hedge funds Commercial banks Source: Shadow Banking: Scoping the Issues (

5 Addressing SIFI risks New international standard for resolution regimes FSB Key Attributes of Effective Resolution Regimes Mandatory resolvability assessments and recovery and resolution plans for G-SIFIs Additional loss absorption capital for G-SIBs More intense and effective supervision of all SIFIs Strengthening core financial market infrastructure CPSS/IOSCO standards Extension to potential non-bank G-SIFIs, domestic SIFIs Extending the G-SIFI framework Identification of SIFIs IAIS to complete its assessment methodology by June 2012 More intense and effective supervision IAIS tightened its Core Principles and will conduct a self-assessment by March 2012 IAIS to complete a study on supervisory colleges by end 2012 IAIS to pursue its work to develop a Common Framework for the Supervision of Internationally Active Insurance Groups by 2013 FSB to set up Peer Review Council to review the full and consistent implementation of the G-SIFI measures 6-3