* FSB to study impact of national bank structure reforms
* Carney: solving too-big-to fail could soften national
(Adds more detail from press conference)
By Huw Jones and Andy Bruce
LONDON, March 31 Global regulators aim to crack
two of the biggest barriers to ending "too big to fail" banks by
the end of this year, Financial Stability Board Chairman Mark
Carney said on Monday.
Regulators are putting in place a complex jigsaw of rules
and mechanisms to wind down failed banks without the massive
market fallout seen when Lehman Brothers went under in 2008.
The FSB is the regulatory arm of the Group of 20 leading
economies (G20) and Carney said progress is expected by December
on requiring the world's top banks to hold capital or bonds in
the event they collapse.
The aim is to shield taxpayers, who had to shore up lenders
in the 2007-09 financial crisis, when it comes to ensuring key
parts of a lender, such as its payments system, can continue.
The derivatives industry will be asked to propose by
September how derivatives contracts can be amended so their
closing out is suspended for a day or two to give regulators
time to wind down a bank that has failed.
"We are looking to put ourselves in a position by Christmas
to have cracked the two biggest issues," Carney told a reporters
after an FSB meeting in London.
Solving the "too big to fail" problem is seen by regulators
as key to restoring trust among themselves so they rely on
globally coordinated rules rather than going it alone.
The Federal Reserve, for example, has angered the European
Union by adopting a new rule requiring foreign lenders, such as
Deutsche Bank or Barclays to hold capital and liquidity at
branches in the United States even though they already hold
capital back home.
EU officials have complained that such a rule will fragment
global markets at a time when they are needed to aid recovery.
The FSB, tasked with ensuring coordination in regulation
among the G20 members, has no powers to force the United States
or other countries to row back on national reforms and relies on
peer pressure for persuasion.
Carney said a project is underway with the IMF and the OECD
to assess the cross-border implications for financial stability
and markets of these unilateral reforms to banking structures.
Apart from the new Fed rule for foreign banks, Britain is
requiring retail arms of lenders to hold more capital to shield
account holders. France and Germany have also announced national
initiatives to isolate risky trading at banks.
Carney said the findings will be presented to G20 leaders at
their summit in Brisbane, Australia in November.
Meanwhile, putting in place a workable cross-border
framework for closing failed banks smoothly could prompt a
rethink of such national initiatives, he said.
"But those types of decision can only be made when all the
pieces of the puzzle have been put together," Carney said.
"The point being, that as we get to the end of this year and
make the progress we intend to, that then maps into adjustment
of the resolution plans in firms and potentially, one would
hope, some adjustment in the applications of national
decisions," Carney added.
The EU has proposed structural reforms for banks which
largely dovetail with what its three biggest members, Britain,
France and Germany are already doing.
The 28-country bloc, however, is unlikely to approve the
reform before 2015, giving the FSB time to persuade the Fed to
have a rethink and avoid a tit-for-tat response from Europe that
banks say will bump up costs and harm market efficiency.
(Reporting by Huw Jones and Andy Bruce, editing by David Evans)