August 21, 2014 / 8:13 AM / 3 years ago

Factbox: G20 gets ready for new bout of rulemaking for financial industry

(Reuters) - Leaders of the Group of 20 economies (G20) aim to draw a line under the 2007-09 financial crisis before the end of this year with the completion of reforms aimed at preventing taxpayers from having to rescue banks again in a future crisis.

The G20 has already approved rules forcing lenders to hold more capital and finance ministers in the group meet in September ahead of a summit of G20 leaders to be held in November to conclude many of the remaining elements:

* Bail-in bonds: Aim is for a deal in November to require the world’s 29 top banks to supplement their capital cushion with the issue of special bonds providing “gone concern loss absorption capacity” (GLAC).

* Financial derivatives: G20 regulators want powers to briefly suspend the closing out of contracts at a failed bank to win time for an orderly wind down of the bank.

* Shadow banking: This refers to a vast, hitherto lightly regulated $70 trillion credit market that includes participants in debt instrument repurchase (repo) agreements, securities lending, and money market funds. The aim is to impose the world’s first common minimum “haircut” or discount on the value of the collateral needed to back repo and securities lending transactions between banks and ‘shadow banking’ participants. There may be a public consultation on whether to apply such haircuts market wide.

* Basel Committee of global banking supervisors from G20 countries to finalize the net stable funding ratio (NSFR) or mandatory long-term buffer of bonds to ensure banks have enough long term funding.


* Basel Committee expected to consult on ending excessive variations in how lenders tot up risks from assets to calculate capital adequacy buffers. Follows scepticism among UK and U.S. regulators over how banks arrive at risk-weighted asset totals.

* G20 insurance regulators are drafting the first global capital solvency rule for nine big insurers that have been designated as being systemically important. U.S. insurance regulators yet to be convinced that such a rule is needed;

* G20’s Financial Stability Board has proposed a framework for more intensive supervision of large financial institutions like funds. Big resistance from industry with more consultation due.

Reporting by Huw Jones; Editing by Greg Mahlich

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